Loans and the Allowance for Loan Losses | Loans and the Allowance for Loan Losses (In Thousands, Except Number of Loans) The following is a summary of loans as of the dates presented: March 31, December 31, 2015 Commercial, financial, agricultural $ 654,934 $ 636,837 Lease financing 43,605 35,978 Real estate – construction 377,574 357,665 Real estate – 1-4 family mortgage 1,777,495 1,735,323 Real estate – commercial mortgage 2,607,510 2,533,729 Installment loans to individuals 113,280 115,093 Gross loans 5,574,398 5,414,625 Unearned income (1,668 ) (1,163 ) Loans, net of unearned income 5,572,730 5,413,462 Allowance for loan losses (42,859 ) (42,437 ) Net loans $ 5,529,871 $ 5,371,025 Past Due and Nonaccrual Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Generally, the recognition of interest on mortgage and commercial loans is discontinued at the time the loan is 90 days past due unless the credit is well-secured and in process of collection. Consumer and other retail loans are typically charged-off no later than the time the loan is 120 days past due. In all cases, loans are placed on nonaccrual status or charged-off at an earlier date if collection of principal or interest is considered doubtful. Loans may be placed on nonaccrual regardless of whether or not such loans are considered past due. All interest accrued for the current year, but not collected, for loans that are placed on nonaccrual status or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return 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. The following table provides an aging of past due and nonaccrual loans, segregated by class, as of the dates presented: Accruing Loans Nonaccruing Loans 30-89 Days Past Due 90 Days or More Past Due Current Loans Total Loans 30-89 Days Past Due 90 Days or More Past Due Current Loans Total Loans Total Loans March 31, 2016 Commercial, financial, agricultural $ 1,297 $ 1,404 $ 651,749 $ 654,450 $ — $ 236 $ 248 $ 484 $ 654,934 Lease financing — — 43,605 43,605 — — — — 43,605 Real estate – construction 898 242 376,434 377,574 — — — — 377,574 Real estate – 1-4 family mortgage 8,785 6,783 1,751,451 1,767,019 254 2,256 7,966 10,476 1,777,495 Real estate – commercial mortgage 6,962 9,057 2,575,720 2,591,739 10 1,318 14,443 15,771 2,607,510 Installment loans to individuals 406 157 112,682 113,245 — 28 7 35 113,280 Unearned income — — (1,668 ) (1,668 ) — — — — (1,668 ) Total $ 18,348 $ 17,643 $ 5,509,973 $ 5,545,964 $ 264 $ 3,838 $ 22,664 $ 26,766 $ 5,572,730 December 31, 2015 Commercial, financial, agricultural $ 1,296 $ 1,077 $ 634,037 $ 636,410 $ 30 $ 133 $ 264 $ 427 $ 636,837 Lease financing — — 35,978 35,978 — — — — 35,978 Real estate – construction 69 176 357,420 357,665 — — — — 357,665 Real estate – 1-4 family mortgage 9,196 6,457 1,707,230 1,722,883 528 3,663 8,249 12,440 1,735,323 Real estate – commercial mortgage 4,849 8,581 2,504,192 2,517,622 568 2,263 13,276 16,107 2,533,729 Installment loans to individuals 260 102 114,671 115,033 — 53 7 60 115,093 Unearned income — — (1,163 ) (1,163 ) — — — — (1,163 ) Total $ 15,670 $ 16,393 $ 5,352,365 $ 5,384,428 $ 1,126 $ 6,112 $ 21,796 $ 29,034 $ 5,413,462 Impaired Loans A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Impairment is measured on a loan-by-loan basis for commercial, consumer and construction loans above a minimum dollar amount threshold by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are evaluated collectively for impairment. When the ultimate collectability of an impaired loan’s principal is in doubt, wholly or partially, all cash receipts are applied to principal. Once the recorded balance has been reduced to zero, future cash receipts are applied to interest income, to the extent any interest has been foregone, and then they are recorded as recoveries of any amounts previously charged-off. For impaired loans, a specific reserve is established to adjust the carrying value of the loan to its estimated net realizable value. Loans accounted for under Financial Accounting Standards Board Accounting Standards Codification Topic (“ASC”) 310-20 “Nonrefundable Fees and Other Cost” (“ASC 310-20”) and are impaired loans recognized in conformity with ASC 310, “Receivables” (“ASC 310”), segregated by class, were as follows as of the dates presented: Unpaid Contractual Principal Balance Recorded Investment With Allowance Recorded Investment With No Allowance Total Recorded Investment Related Allowance March 31, 2016 Commercial, financial, agricultural $ 328 $ 321 $ — $ 321 $ 6 Lease financing — — — — — Real estate – construction — — — — — Real estate – 1-4 family mortgage 16,052 14,786 — 14,786 4,311 Real estate – commercial mortgage 20,067 16,450 — 16,450 3,082 Installment loans to individuals 67 67 — 67 — Total $ 36,514 $ 31,624 $ — $ 31,624 $ 7,399 December 31, 2015 Commercial, financial, agricultural $ 1,308 $ 358 $ 12 $ 370 $ 6 Lease financing — — — — — Real estate – construction 2,710 2,698 — 2,698 20 Real estate – 1-4 family mortgage 18,193 16,650 — 16,650 4,475 Real estate – commercial mortgage 20,169 16,819 — 16,819 3,099 Installment loans to individuals 90 90 — 90 — Totals $ 42,470 $ 36,615 $ 12 $ 36,627 $ 7,600 The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-20 and are impaired loans for the periods presented: Three Months Ended Three Months Ended March 31, 2016 March 31, 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial, financial, agricultural $ 326 $ 2 $ 950 $ 7 Lease financing — — — — Real estate – construction — — 104 — Real estate – 1-4 family mortgage 15,252 90 13,886 67 Real estate – commercial mortgage 16,547 132 25,618 177 Installment loans to individuals 67 1 — — Total $ 32,192 $ 225 $ 40,558 $ 251 Loans accounted for under ASC 310-30 “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”) and are impaired loans recognized in conformity with ASC 310, segregated by class, were as follows as of the dates presented: Unpaid Contractual Principal Balance Recorded Investment With Allowance Recorded Investment With No Allowance Total Recorded Investment Related Allowance March 31, 2016 Commercial, financial, agricultural $ 24,323 $ 4,807 $ 9,643 $ 14,450 $ 422 Lease financing — — — — — Real estate – construction 2,635 — 2,504 2,504 — Real estate – 1-4 family mortgage 107,167 16,573 72,391 88,964 335 Real estate – commercial mortgage 279,548 56,555 160,034 216,589 1,264 Installment loans to individuals 3,239 393 2,109 2,502 1 Total $ 416,912 $ 78,328 $ 246,681 $ 325,009 $ 2,022 December 31, 2015 Commercial, financial, agricultural $ 27,049 $ 5,197 $ 11,292 $ 16,489 $ 353 Lease financing — — — — — Real estate – construction 2,916 — 2,749 2,749 — Real estate – 1-4 family mortgage 109,293 15,702 75,947 91,649 256 Real estate – commercial mortgage 287,821 53,762 168,848 222,610 1,096 Installment loans to individuals 3,432 400 2,268 2,668 1 Totals $ 430,511 $ 75,061 $ 261,104 $ 336,165 $ 1,706 The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-30 and are impaired loans for the periods presented: Three Months Ended Three Months Ended March 31, 2016 March 31, 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial, financial, agricultural $ 18,024 $ 327 $ 25,978 $ 233 Lease financing — — — — Real estate – construction 2,608 25 — — Real estate – 1-4 family mortgage 101,089 953 86,713 1,043 Real estate – commercial mortgage 250,041 2,831 242,712 2,871 Installment loans to individuals 2,954 29 4,215 46 Total $ 374,716 $ 4,165 $ 359,618 $ 4,193 Restructured Loans Restructured loans are those for which concessions have been granted to the borrower due to a deterioration of the borrower’s financial condition and which are performing in accordance with the new terms. Such concessions may include reduction in interest rates or deferral of interest or principal payments. In evaluating whether to restructure a loan, management analyzes the long-term financial condition of the borrower, including guarantor and collateral support, to determine whether the proposed concessions will increase the likelihood of repayment of principal and interest. The following tables illustrate the impact of modifications classified as restructured loans and are segregated by class for the periods presented: Number of Loans Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment March 31, 2016 Commercial, financial, agricultural — $ — $ — Real estate – construction — — — Real estate – 1-4 family mortgage 10 780 662 Real estate – commercial mortgage 2 612 605 Installment loans to individuals — — — Total 12 $ 1,392 $ 1,267 March 31, 2015 Commercial, financial, agricultural — $ — $ — Real estate – construction — — — Real estate – 1-4 family mortgage 17 1,198 1,037 Real estate – commercial mortgage 8 6,899 6,463 Installment loans to individuals — — — Total 25 $ 8,097 $ 7,500 Restructured loans that are not performing in accordance with their restructured terms that are either contractually 90 days or more past due or placed on nonaccrual status are reported as nonperforming loans. There were two restructured loans totaling $136 that were contractually 90 days past due or more and still accruing at March 31, 2016 and two restructured loans totaling $314 that were contractually 90 days past due or more and still accruing at December 31, 2015 . The outstanding balance of restructured loans on nonaccrual status was $12,531 and $13,517 at March 31, 2016 and December 31, 2015 , respectively. Changes in the Company’s restructured loans are set forth in the table below: Number of Loans Recorded Investment Totals at January 1, 2016 86 $ 13,453 Additional loans with concessions 12 1,267 Reductions due to: Reclassified as nonperforming (2 ) (134 ) Paid in full (4 ) (398 ) Charge-offs — — Transfer to other real estate owned — — Principal paydowns — (142 ) Lapse of concession period — — Reclassified as performing — — Totals at March 31, 2016 92 $ 14,046 The allocated allowance for loan losses attributable to restructured loans was $1,010 and $979 at March 31, 2016 and December 31, 2015 , respectively. The Company had no remaining availability under commitments to lend additional funds on these restructured loans at March 31, 2016 or December 31, 2015 . Credit Quality For loans originated for commercial purposes, internal risk-rating grades are assigned by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the resulting ratings, as well as other external statistics and factors such as delinquency, to track the migration performance of the portfolio balances of these loans. Loan grades range between 1 and 9 , with 1 being loans with the least credit risk. Loans that migrate toward the “Pass” grade (those with a risk rating between 1 and 4 ) or within the “Pass” grade generally have a lower risk of loss and therefore a lower risk factor applied to the loan balances. The “Watch” grade (those with a risk rating of 5 ) is utilized on a temporary basis for “Pass” grade loans where a significant adverse risk-modifying action is anticipated in the near term. Loans that migrate toward the “Substandard” grade (those with a risk rating between 6 and 9 ) generally have a higher risk of loss and therefore a higher risk factor applied to the related loan balances. The following table presents the Company’s loan portfolio by risk-rating grades as of the dates presented: Pass Watch Substandard Total March 31, 2016 Commercial, financial, agricultural $ 463,922 $ 9,302 $ 1,988 $ 475,212 Lease financing — — — — Real estate – construction 289,169 679 — 289,848 Real estate – 1-4 family mortgage 287,219 8,102 12,112 307,433 Real estate – commercial mortgage 2,029,759 21,322 22,509 2,073,590 Installment loans to individuals 75 — 116 191 Total $ 3,070,144 $ 39,405 $ 36,725 $ 3,146,274 December 31, 2015 Commercial, financial, agricultural $ 465,185 $ 8,498 $ 1,734 $ 475,417 Lease financing — — — — Real estate – construction 273,398 483 — 273,881 Real estate – 1-4 family mortgage 275,269 9,712 15,460 300,441 Real estate – commercial mortgage 1,968,352 27,175 20,683 2,016,210 Installment loans to individuals 51 — 5 56 Total $ 2,982,255 $ 45,868 $ 37,882 $ 3,066,005 For portfolio balances of consumer, consumer mortgage and certain other loans originated for other than commercial purposes, allowance factors are determined based on historical loss ratios by portfolio for the preceding eight quarters and may be adjusted by other qualitative criteria. The following table presents the performing status of the Company’s loan portfolio not subject to risk rating as of the dates presented: Performing Non- Performing Total March 31, 2016 Commercial, financial, agricultural $ 165,137 $ 135 $ 165,272 Lease financing 41,937 — 41,937 Real estate – construction 85,153 69 85,222 Real estate – 1-4 family mortgage 1,377,078 4,020 1,381,098 Real estate – commercial mortgage 316,594 737 317,331 Installment loans to individuals 110,467 120 110,587 Total $ 2,096,366 $ 5,081 $ 2,101,447 December 31, 2015 Commercial, financial, agricultural $ 144,838 $ 93 $ 144,931 Lease financing 34,815 — 34,815 Real estate – construction 81,035 — 81,035 Real estate – 1-4 family mortgage 1,340,356 2,877 1,343,233 Real estate – commercial mortgage 294,042 867 294,909 Installment loans to individuals 112,275 94 112,369 Total $ 2,007,361 $ 3,931 $ 2,011,292 Loans Acquired with Deteriorated Credit Quality Loans acquired in business combinations that exhibited, at the date of acquisition, evidence of deterioration of the credit quality since origination, such that it was probable that all contractually required payments would not be collected, were as follows as of the dates presented: Covered Loans Not Covered Loans Total March 31, 2016 Commercial, financial, agricultural $ 232 $ 14,218 $ 14,450 Lease financing — — — Real estate – construction 85 2,419 2,504 Real estate – 1-4 family mortgage 26,612 62,352 88,964 Real estate – commercial mortgage 3,679 212,910 216,589 Installment loans to individuals 36 2,466 2,502 Total $ 30,644 $ 294,365 $ 325,009 December 31, 2015 Commercial, financial, agricultural $ 1,759 $ 14,730 $ 16,489 Lease financing — — — Real estate – construction 91 2,658 2,749 Real estate – 1-4 family mortgage 31,354 60,295 91,649 Real estate – commercial mortgage 33,726 188,884 222,610 Installment loans to individuals 43 2,625 2,668 Total $ 66,973 $ 269,192 $ 336,165 The references in the table above and elsewhere in these Notes to "covered loans" and "not covered loans" (as well as to "covered OREO" and "not covered OREO") refer to loans (or OREO, as applicable) covered and not covered, respectively, by loss-share agreements with the FDIC. See Note E, "FDIC Loss-Share Indemnification Asset," below for more information. The following table presents the fair value of loans determined to be impaired at the time of acquisition and determined not to be impaired at the time of acquisition at March 31, 2016 : Covered Loans Not Covered Loans Total Contractually-required principal and interest $ 38,534 $ 415,174 $ 453,708 Nonaccretable difference (1) (5,121 ) (77,697 ) (82,818 ) Cash flows expected to be collected 33,413 337,477 370,890 Accretable yield (2) (2,769 ) (43,112 ) (45,881 ) Fair value $ 30,644 $ 294,365 $ 325,009 (1) Represents contractual principal and interest cash flows of $82,618 and $201 , respectively, not expected to be collected. (2) Represents contractual interest payments of $2,278 expected to be collected and purchase discount of $43,603 . Changes in the accretable yield of loans acquired with deteriorated credit quality were as follows: Covered Loans Not Covered Loans Total Balance at January 1, 2016 $ (3,700 ) $ (44,592 ) $ (48,292 ) Additions due to acquisition 725 (725 ) — Reclasses from nonaccretable difference (213 ) (1,134 ) (1,347 ) Accretion 391 3,339 3,730 Charge-offs 28 — 28 Balance at March 31, 2016 $ (2,769 ) $ (43,112 ) $ (45,881 ) The following table presents the fair value of loans acquired from Heritage Financial Group, Inc. (“Heritage”) as of the July 1, 2015 acquisition date. At acquisition date: July 1, 2015 Contractually-required principal and interest $ 1,212,372 Nonaccretable difference 14,260 Cash flows expected to be collected 1,198,112 Accretable yield 69,465 Fair value $ 1,128,647 Allowance for Loan Losses The allowance for loan losses is maintained at a level believed adequate by management based on its ongoing analysis of the loan portfolio to absorb probable credit losses inherent in the entire loan portfolio, including collective impairment as recognized under ASC 450, “Contingencies”. Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310. The balance of these loans and their related allowance is included in management’s estimation and analysis of the allowance for loan losses. Management and the internal loan review staff evaluate the adequacy of the allowance for loan losses quarterly. The allowance for loan losses is evaluated based on a continuing assessment of problem loans, the types of loans, historical loss experience, new lending products, emerging credit trends, changes in the size and character of loan categories and other factors, including its risk rating system, regulatory guidance and economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses is established through a provision for loan losses charged to earnings resulting from measurements of inherent credit risk in the loan portfolio and estimates of probable losses or impairments of individual loans. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The following table provides a roll forward of the allowance for loan losses and a breakdown of the ending balance of the allowance based on the Company’s impairment methodology for the periods presented: Commercial Real Estate - Construction Real Estate - 1-4 Family Mortgage Real Estate - Commercial Mortgage Installment and Other (1) Total Three Months Ended March 31, 2016 Allowance for loan losses: Beginning balance $ 4,186 $ 1,852 $ 13,908 $ 21,111 $ 1,380 $ 42,437 Charge-offs (657 ) — (116 ) (1,001 ) (180 ) (1,954 ) Recoveries 53 6 395 92 30 576 Net (charge-offs) recoveries (604 ) 6 279 (909 ) (150 ) (1,378 ) Provision for loan losses 601 85 365 530 198 1,779 Benefit attributable to FDIC loss-share agreements (15 ) — (37 ) (118 ) — (170 ) Recoveries payable to FDIC 3 — 27 161 — 191 Provision for loan losses charged to operations 589 85 355 573 198 1,800 Ending balance $ 4,171 $ 1,943 $ 14,542 $ 20,775 $ 1,428 $ 42,859 Period-End Amount Allocated to: Individually evaluated for impairment $ 6 $ — $ 4,311 $ 3,082 $ — $ 7,399 Collectively evaluated for impairment 3,743 1,943 9,896 16,429 1,427 33,438 Acquired with deteriorated credit quality 422 — 335 1,264 1 2,022 Ending balance $ 4,171 $ 1,943 $ 14,542 $ 20,775 $ 1,428 $ 42,859 Commercial Real Estate - Construction Real Estate - 1-4 Family Mortgage Real Estate - Commercial Mortgage Installment and Other (1) Total Three Months Ended March 31, 2015 Allowance for loan losses: Beginning balance $ 3,305 $ 1,415 $ 13,549 $ 22,759 $ 1,261 $ 42,289 Charge-offs (235 ) — (485 ) (633 ) (50 ) (1,403 ) Recoveries 35 6 155 112 33 341 Net (charge-offs) recoveries (200 ) 6 (330 ) (521 ) (17 ) (1,062 ) Provision for loan losses 1,027 (63 ) 618 (887 ) 37 732 Benefit attributable to FDIC loss-share agreements (25 ) — — (101 ) — (126 ) Recoveries payable to FDIC 2 1 208 258 — 469 Provision for loan losses charged to operations 1,004 (62 ) 826 (730 ) 37 1,075 Ending balance $ 4,109 $ 1,359 $ 14,045 $ 21,508 $ 1,281 $ 42,302 Period-End Amount Allocated to: Individually evaluated for impairment $ — $ — $ 4,227 $ 2,293 $ — $ 6,520 Collectively evaluated for impairment 2,911 1,359 9,541 18,102 1,280 33,193 Acquired with deteriorated credit quality 1,198 — 277 1,113 1 2,589 Ending balance $ 4,109 $ 1,359 $ 14,045 $ 21,508 $ 1,281 $ 42,302 (1) Includes lease financing receivables. The following table provides the recorded investment in loans, net of unearned income, based on the Company’s impairment methodology as of the dates presented: Commercial Real Estate - Construction Real Estate - 1-4 Family Mortgage Real Estate - Commercial Mortgage Installment and Other (1) Total March 31, 2016 Individually evaluated for impairment $ 321 $ — $ 14,786 $ 16,450 $ 67 $ 31,624 Collectively evaluated for impairment 640,163 375,070 1,673,745 2,374,471 152,648 5,216,097 Acquired with deteriorated credit quality 14,450 2,504 88,964 216,589 2,502 325,009 Ending balance $ 654,934 $ 377,574 $ 1,777,495 $ 2,607,510 $ 155,217 $ 5,572,730 December 31, 2015 Individually evaluated for impairment $ 370 $ 2,698 $ 16,650 $ 16,819 $ 90 $ 36,627 Collectively evaluated for impairment 619,978 352,218 1,627,024 2,294,300 147,150 5,040,670 Acquired with deteriorated credit quality 16,489 2,749 91,649 222,610 2,668 336,165 Ending balance $ 636,837 $ 357,665 $ 1,735,323 $ 2,533,729 $ 149,908 $ 5,413,462 (1) Includes lease financing receivables. |