Non Purchased Loans | Non Purchased Loans (In Thousands, Except Number of Loans) For purposes of this Note 4, all references to “loans” mean non purchased loans. The following is a summary of non purchased loans and leases as of the dates presented: March 31, December 31, 2017 Commercial, financial, agricultural $ 803,146 $ 763,823 Lease financing 55,898 57,354 Real estate – construction 582,430 547,658 Real estate – 1-4 family mortgage 1,785,271 1,729,534 Real estate – commercial mortgage 2,503,680 2,390,076 Installment loans to individuals 103,059 103,452 Gross loans 5,833,484 5,591,897 Unearned income (3,362 ) (3,341 ) Loans, net of unearned income $ 5,830,122 $ 5,588,556 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 status 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, 2018 Commercial, financial, agricultural $ 3,078 $ 1,006 $ 796,898 $ 800,982 $ 508 $ 1,555 $ 101 $ 2,164 $ 803,146 Lease financing 481 43 55,215 55,739 — 159 — 159 55,898 Real estate – construction 3,564 50 578,816 582,430 — — — — 582,430 Real estate – 1-4 family mortgage 8,812 2,176 1,771,834 1,782,822 54 1,581 814 2,449 1,785,271 Real estate – commercial mortgage 3,016 289 2,495,780 2,499,085 564 2,253 1,778 4,595 2,503,680 Installment loans to individuals 477 41 102,505 103,023 — 17 19 36 103,059 Unearned income — — (3,362 ) (3,362 ) — — — — (3,362 ) Total $ 19,428 $ 3,605 $ 5,797,686 $ 5,820,719 $ 1,126 $ 5,565 $ 2,712 $ 9,403 $ 5,830,122 December 31, 2017 Commercial, financial, agricultural $ 2,722 $ 22 $ 759,143 $ 761,887 $ 205 $ 1,033 $ 698 $ 1,936 $ 763,823 Lease financing 47 — 57,148 57,195 — 159 — 159 57,354 Real estate – construction 50 — 547,608 547,658 — — — — 547,658 Real estate – 1-4 family mortgage 11,810 2,194 1,712,982 1,726,986 — 1,818 730 2,548 1,729,534 Real estate – commercial mortgage 1,921 727 2,381,871 2,384,519 — 2,877 2,680 5,557 2,390,076 Installment loans to individuals 429 72 102,901 103,402 1 28 21 50 103,452 Unearned income — — (3,341 ) (3,341 ) — — — — (3,341 ) Total $ 16,979 $ 3,015 $ 5,558,312 $ 5,578,306 $ 206 $ 5,915 $ 4,129 $ 10,250 $ 5,588,556 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, as applicable, 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 FASB ASC 310-20, “Nonrefundable Fees and Other Cost” (“ASC 310-20”), and which 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, 2018 Commercial, financial, agricultural $ 2,612 $ 2,491 $ — $ 2,491 $ 223 Lease financing 159 159 — 159 2 Real estate – construction 150 150 — 150 1 Real estate – 1-4 family mortgage 9,106 8,111 — 8,111 121 Real estate – commercial mortgage 9,373 4,817 1,356 6,173 956 Installment loans to individuals 106 102 — 102 1 Total $ 21,506 $ 15,830 $ 1,356 $ 17,186 $ 1,304 December 31, 2017 Commercial, financial, agricultural $ 3,043 $ 2,365 $ — $ 2,365 $ 138 Lease financing 159 159 — 159 2 Real estate – construction 578 578 — 578 4 Real estate – 1-4 family mortgage 10,018 8,169 703 8,872 561 Real estate – commercial mortgage 12,463 9,652 — 9,652 1,861 Installment loans to individuals 121 117 — 117 1 Totals $ 26,382 $ 21,040 $ 703 $ 21,743 $ 2,567 The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-20 and which are impaired loans for the periods presented: Three Months Ended Three Months Ended March 31, 2018 March 31, 2017 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial, financial, agricultural $ 2,338 $ 11 $ 2,714 $ 39 Lease financing 159 — — — Real estate – construction 150 18 — — Real estate – 1-4 family mortgage 8,197 67 11,088 26 Real estate – commercial mortgage 6,670 92 15,314 106 Installment loans to individuals 104 1 118 — Total $ 17,618 $ 189 $ 29,234 $ 171 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 which were made during the periods presented and held on the Consolidated Balance Sheets at the respective period end: Number of Loans Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Three months ended March 31, 2018 Real estate – 1-4 family mortgage 3 $ 576 $ 576 Real estate – commercial mortgage 1 83 78 Total 4 $ 659 $ 654 Three months ended March 31, 2017 Real estate – 1-4 family mortgage 2 $ 177 $ 174 Real estate – commercial mortgage 2 146 156 Total 4 $ 323 $ 330 With respect to loans that were restructured during the three months ended March 31, 2017 , $156 subsequently defaulted within twelve months of the restructuring. With respect to loans that were restructured during the three months ended March 31, 2018 , none have subsequently defaulted as of the date of this report. Restructured loans 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 four restructured loans in the amount of $571 contractually 90 days past due or more and still accruing at March 31, 2018 and one restructured loan in the amount of $57 contractually 90 days past due or more and still accruing at March 31, 2017 . The outstanding balance of restructured loans on nonaccrual status was $2,570 and $6,086 at March 31, 2018 and March 31, 2017 , respectively. Changes in the Company’s restructured loans are set forth in the table below: Number of Loans Recorded Investment Totals at January 1, 2018 54 $ 5,588 Additional loans with concessions 4 657 Reductions due to: Reclassified as nonperforming (3 ) (192 ) Paid in full (2 ) (773 ) Principal paydowns — (64 ) Totals at March 31, 2018 53 $ 5,216 The allocated allowance for loan losses attributable to restructured loans was $92 and $241 at March 31, 2018 and March 31, 2017 , respectively. The Company had $20 and $142 in remaining availability under commitments to lend additional funds on these restructured loans at March 31, 2018 and March 31, 2017 , respectively. Credit Quality For commercial and commercial real estate loans, 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 within the “Pass” grade (historically, those with a risk rating between 1 and 4) generally have a lower risk of loss and therefore a lower risk factor applied to the loan balances. Management has established more granular risk rating categories to better identify heightened credit risk as loans migrate downward in the risk rating system. The “Pass” grade is now reserved for loans with a risk rating between 1 and 4A , and the “Watch” grade (those with a risk rating of 4B and 4E ) 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 5 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, 2018 Commercial, financial, agricultural $ 585,850 $ 11,380 $ 5,758 $ 602,988 Real estate – construction 512,603 8,690 440 521,733 Real estate – 1-4 family mortgage 262,107 669 7,609 270,385 Real estate – commercial mortgage 2,094,811 52,407 18,988 2,166,206 Installment loans to individuals 852 — — 852 Total $ 3,456,223 $ 73,146 $ 32,795 $ 3,562,164 December 31, 2017 Commercial, financial, agricultural $ 554,943 $ 11,496 $ 4,402 $ 570,841 Real estate – construction 483,498 662 81 484,241 Real estate – 1-4 family mortgage 254,643 505 8,697 263,845 Real estate – commercial mortgage 1,983,750 50,428 24,241 2,058,419 Installment loans to individuals 921 — — 921 Total $ 3,277,755 $ 63,091 $ 37,421 $ 3,378,267 For portfolio balances of consumer, small balance consumer mortgage loans, such as 1-4 family mortgage loans 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, 2018 Commercial, financial, agricultural $ 198,111 $ 2,047 $ 200,158 Lease financing 52,334 202 52,536 Real estate – construction 60,648 49 60,697 Real estate – 1-4 family mortgage 1,511,105 3,781 1,514,886 Real estate – commercial mortgage 336,584 890 337,474 Installment loans to individuals 102,130 77 102,207 Total $ 2,260,912 $ 7,046 $ 2,267,958 December 31, 2017 Commercial, financial, agricultural $ 191,473 $ 1,509 $ 192,982 Lease financing 53,854 159 54,013 Real estate – construction 63,417 — 63,417 Real estate – 1-4 family mortgage 1,462,347 3,342 1,465,689 Real estate – commercial mortgage 330,441 1,216 331,657 Installment loans to individuals 102,409 122 102,531 Total $ 2,203,941 $ 6,348 $ 2,210,289 Purchased Loans (In Thousands, Except Number of Loans) For purposes of this Note 5, all references to “loans” mean purchased loans. The following is a summary of purchased loans as of the dates presented: March 31, December 31, 2017 Commercial, financial, agricultural $ 243,672 $ 275,570 Real estate – construction 75,061 85,731 Real estate – 1-4 family mortgage 572,830 614,187 Real estate – commercial mortgage 960,273 1,037,454 Installment loans to individuals 16,112 18,824 Gross loans 1,867,948 2,031,766 Unearned income — — Loans, net of unearned income $ 1,867,948 $ 2,031,766 Past Due and Nonaccrual Loans The Company’s policies with respect to placing loans on nonaccrual status or charging off loans, and its accounting for interest on any such loans, are described above in Note 4, “Non Purchased Loans.” 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, 2018 Commercial, financial, agricultural $ 388 $ 552 $ 242,313 $ 243,253 $ — $ 314 $ 105 $ 419 $ 243,672 Real estate – construction — — 75,061 75,061 — — — — 75,061 Real estate – 1-4 family mortgage 5,491 2,116 561,608 569,215 1,265 1,046 1,304 3,615 572,830 Real estate – commercial mortgage 3,142 1,856 954,128 959,126 — 830 317 1,147 960,273 Installment loans to individuals 124 40 15,789 15,953 6 52 101 159 16,112 Total $ 9,145 $ 4,564 $ 1,848,899 $ 1,862,608 $ 1,271 $ 2,242 $ 1,827 $ 5,340 $ 1,867,948 December 31, 2017 Commercial, financial, agricultural $ 1,119 $ 532 $ 273,488 $ 275,139 $ — $ 199 $ 232 $ 431 $ 275,570 Real estate – construction 415 — 85,316 85,731 — — — — 85,731 Real estate – 1-4 family mortgage 6,070 2,280 602,464 610,814 385 879 2,109 3,373 614,187 Real estate – commercial mortgage 2,947 2,910 1,031,141 1,036,998 191 99 166 456 1,037,454 Installment loans to individuals 208 9 18,443 18,660 59 — 105 164 18,824 Total $ 10,759 $ 5,731 $ 2,010,852 $ 2,027,342 $ 635 $ 1,177 $ 2,612 $ 4,424 $ 2,031,766 Impaired Loans The Company’s policies with respect to the determination of whether a loan is impaired and the treatment of such loans are described above in Note 4, “Non Purchased Loans.” Loans accounted for under ASC 310-20, and which 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, 2018 Commercial, financial, agricultural $ 421 $ 336 $ 21 $ 357 $ 49 Real estate – construction 252 — 249 249 — Real estate – 1-4 family mortgage 6,195 1,493 4,133 5,626 47 Real estate – commercial mortgage 1,647 1,384 245 1,629 70 Installment loans to individuals 162 153 6 159 4 Total $ 8,677 $ 3,366 $ 4,654 $ 8,020 $ 170 December 31, 2017 Commercial, financial, agricultural $ 757 $ 625 $ 74 $ 699 $ 52 Real estate – construction 1,207 — 1,199 1,199 — Real estate – 1-4 family mortgage 6,173 1,385 4,225 5,610 45 Real estate – commercial mortgage 901 728 165 893 6 Installment loans to individuals 165 154 9 163 4 Totals $ 9,203 $ 2,892 $ 5,672 $ 8,564 $ 107 The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-20 and which are impaired loans for the periods presented: Three Months Ended Three Months Ended March 31, 2018 March 31, 2017 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial, financial, agricultural $ 363 $ 3 $ 541 $ 2 Real estate – construction 252 1 — — Real estate – 1-4 family mortgage 6,320 40 5,481 21 Real estate – commercial mortgage 1,642 18 3,090 35 Installment loans to individuals 160 — 85 — Total $ 8,737 $ 62 $ 9,197 $ 58 Loans accounted for under ASC 310-30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality” (“ASC 310-30”), and which 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, 2018 Commercial, financial, agricultural $ 21,363 $ 5,414 $ 7,519 $ 12,933 $ 305 Real estate – 1-4 family mortgage 60,590 16,093 34,103 50,196 486 Real estate – commercial mortgage 178,682 63,979 85,568 149,547 1,023 Installment loans to individuals 1,744 757 877 1,634 3 Total $ 262,379 $ 86,243 $ 128,067 $ 214,310 $ 1,817 December 31, 2017 Commercial, financial, agricultural $ 24,179 $ 5,768 $ 9,547 $ 15,315 $ 312 Real estate – 1-4 family mortgage 65,049 15,910 38,059 53,969 572 Real estate – commercial mortgage 186,720 65,108 91,230 156,338 892 Installment loans to individuals 1,761 698 940 1,638 1 Totals $ 277,709 $ 87,484 $ 139,776 $ 227,260 $ 1,777 The following table presents the average recorded investment and interest income recognized on loans accounted for under ASC 310-30 and which are impaired loans for the periods presented: Three Months Ended Three Months Ended March 31, 2018 March 31, 2017 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial, financial, agricultural $ 16,899 $ 225 $ 14,088 $ 247 Real estate – 1-4 family mortgage 58,749 673 78,341 865 Real estate – commercial mortgage 167,365 1,972 196,807 2,319 Installment loans to individuals 1,687 18 2,104 21 Total $ 244,700 $ 2,888 $ 291,340 $ 3,452 Restructured Loans An explanation of what constitutes a “restructured loan,” and management’s analysis in determining whether to restructure a loan, are described above in Note 4, “Non Purchased Loans.” The following tables illustrate the impact of modifications classified as restructured loans which were made during the periods presented and held on the Consolidated Balance Sheets at the respective period end: Number of Loans Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Three months ended March 31, 2018 Commercial, financial, agricultural 1 $ 48 $ 44 Real estate – commercial mortgage 1 8 7 Total 2 $ 56 $ 51 Three months ended March 31, 2017 Real estate – 1-4 family mortgage 10 $ 2,221 $ 1,823 Real estate – commercial mortgage 4 2,721 1,986 Total 14 $ 4,942 $ 3,809 With respect to loans that were restructured during the three months ended March 31, 2017 , $210 subsequently defaulted within twelve months of the restructuring. With respect to loans that were restructured during the three months ended March 31, 2018 , none have subsequently defaulted as of the date of this report. There were no restructured loans contractually 90 days past due or more and still accruing at March 31, 2018 and two restructured loans in the amount of $52 contractually 90 days past due or more and still accruing at March 31, 2017 . The outstanding balance of restructured loans on nonaccrual status was $616 and $1,201 at March 31, 2018 and March 31, 2017 , respectively. Changes in the Company’s restructured loans are set forth in the table below: Number of Loans Recorded Investment Totals at January 1, 2018 68 $ 8,965 Additional loans with concessions 2 86 Reclassified as performing restructured loan 1 3 Reductions due to: Paid in full (1 ) (76 ) Principal paydowns — (371 ) Totals at March 31, 2018 70 $ 8,607 The allocated allowance for loan losses attributable to restructured loans was $100 and $31 at March 31, 2018 and March 31, 2017 , respectively. The Company had $2 and $1,245 in remaining availability under commitments to lend additional funds on these restructured loans at March 31, 2018 and March 31, 2017 , respectively. Credit Quality A discussion of the Company’s policies regarding internal risk-rating of loans is discussed above in Note 4, “Non Purchased Loans.” The following table presents the Company’s loan portfolio by risk-rating grades as of the dates presented: Pass Watch Substandard Total March 31, 2018 Commercial, financial, agricultural $ 208,150 $ 5,116 $ 5,886 $ 219,152 Real estate – construction 70,974 1,537 500 73,011 Real estate – 1-4 family mortgage 85,590 2,525 5,903 94,018 Real estate – commercial mortgage 755,454 15,789 10,048 781,291 Installment loans to individuals 662 — 3 665 Total $ 1,120,830 $ 24,967 $ 22,340 $ 1,168,137 December 31, 2017 Commercial, financial, agricultural $ 241,195 $ 4,974 $ 2,824 $ 248,993 Real estate – construction 81,220 — — 81,220 Real estate – 1-4 family mortgage 91,369 2,498 6,172 100,039 Real estate – commercial mortgage 827,372 17,123 9,003 853,498 Installment loans to individuals 678 — 3 681 Total $ 1,241,834 $ 24,595 $ 18,002 $ 1,284,431 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, 2018 Commercial, financial, agricultural $ 11,548 $ 39 $ 11,587 Real estate – construction 2,050 — 2,050 Real estate – 1-4 family mortgage 427,099 1,517 428,616 Real estate – commercial mortgage 29,313 122 29,435 Installment loans to individuals 13,617 196 13,813 Total $ 483,627 $ 1,874 $ 485,501 December 31, 2017 Commercial, financial, agricultural $ 11,216 $ 46 $ 11,262 Real estate – construction 4,511 — 4,511 Real estate – 1-4 family mortgage 459,038 1,141 460,179 Real estate – commercial mortgage 27,495 123 27,618 Installment loans to individuals 16,344 161 16,505 Total $ 518,604 $ 1,471 $ 520,075 Loans Purchased with Deteriorated Credit Quality Loans purchased 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: Total Purchased Credit Deteriorated Loans March 31, 2018 Commercial, financial, agricultural $ 12,933 Real estate – 1-4 family mortgage 50,196 Real estate – commercial mortgage 149,547 Installment loans to individuals 1,634 Total $ 214,310 December 31, 2017 Commercial, financial, agricultural $ 15,315 Real estate – 1-4 family mortgage 53,969 Real estate – commercial mortgage 156,338 Installment loans to individuals 1,638 Total $ 227,260 The following table presents the fair value of loans that exhibited evidence of deteriorated credit quality at the time of acquisition at March 31, 2018 : Total Purchased Credit Deteriorated Loans Contractually-required principal and interest $ 300,368 Nonaccretable difference (1) (55,373 ) Cash flows expected to be collected 244,995 Accretable yield (2) (30,685 ) Fair value $ 214,310 (1) Represents contractual principal and interest cash flows of $46,019 and $9,354 , respectively, not expected to be collected. (2) Represents contractual principal and interest cash flows of $1,588 and $29,097 , respectively, expected to be collected. Changes in the accretable yield of loans purchased with deteriorated credit quality were as follows as of March 31, 2018: Total Purchased Credit Deteriorated Loans Balance at January 1, 2018 $ (32,207 ) Reclasses from nonaccretable difference (1,499 ) Accretion 2,971 Charge-offs 50 Balance at March 31, 2018 $ (30,685 ) The following table presents the fair value of loans purchased from Metropolitan as of the July 1, 2017 acquisition date. At acquisition date: July 1, 2017 Contractually-required principal and interest $ 1,198,741 Nonaccretable difference (79,165 ) Cash flows expected to be collected 1,119,576 Accretable yield (154,543 ) Fair value $ 965,033 |