LOANS | NOTE 10 – LOANS Generally, the Company will place a delinquent loan in nonaccrual status when the loan becomes 90 days or more past due. At the time a loan is placed in nonaccrual status, all interest which has been accrued on the loan but remains unpaid is reversed and deducted from earnings as a reduction of reported interest income. No additional interest is accrued on the loan balance until the collection of both principal and interest becomes reasonably certain. The following tables summarize by class our loans classified as past due in excess of 30 days or more in addition to those loans classified as non-accrual or PCI: March 31, 2019 ($ in thousands) Past Due 30 to 89 Days Past Due Non- Accrual PCI Total Total Loans Real Estate-construction $ 1,220 $ 53 $ 6 $ 2,144 $ 3,423 $ 348,788 Residential secured loans including multifamily and farmland 3,222 671 955 9,370 14,218 722,611 Real Estate-non-farm non-residential 231 140 9,275 3,465 13,111 857,918 Commercial 726 64 1,043 156 1,989 340,333 Lease financing receivable - - - - - 3,060 Obligations of states and subdivisions - - - - - 13,734 Consumer 281 15 62 26 384 48,904 Total $ 5,680 $ 943 $ 11,341 $ 15,161 $ 33,125 $ 2,335,348 December 31, 2018 ($ in thousands) Past Due 30 to 89 Days Past Due Non- Accrual PCI Total Total Loans Real Estate-construction $ 818 $ 114 $ 8 $ 1,830 $ 2,770 $ 298,718 Residential secured loans including multi- family and farmland 5,528 650 1,411 7,781 15,370 617,804 Real Estate-non farm non-residential 4,319 456 9,179 3,576 17,530 776,880 Commercial 1,650 - 1,024 184 2,858 301,182 Lease financing receivable - - - - - 2,891 Obligations of states and subdivisions - - - - - 16,941 Installment and other 507 45 46 34 632 46,006 Total $ 12,822 $ 1,265 $ 11,668 $ 13,405 $ 39,160 $ 2,060,422 We acquired loans with deteriorated credit quality in 2014, 2017, 2018 and 2019. These loans were recorded at estimated fair value at the acquisition date with no carryover of the related allowance for loan losses. The acquired loans were segregated as of the acquisition date between those considered to be performing (purchased non-impaired loans) and those with evidence of credit deterioration (purchased credit impaired loans). Acquired loans are considered to be impaired if it is probable, based on current available information, that the Company will be unable to collect all cash flows as expected. If the collection of expected cash flows cannot reasonably be estimated, no interest income will be recognized on these loans. The following table presents information regarding the contractually required payments receivable, cash flows expected to be collected and the estimated fair value of PCI loans acquired in the FPB acquisition. March 2, 2019 ($ in thousands) Commercial, Mortgage- Mortgage- Commercial Total Contractually required payments $ 100 $ 1,562 $ 3,045 $ 8 $ 4,715 Cash flows expected to be collected 77 1,317 2,901 - 4,295 Fair value of loans acquired 70 1,224 2,622 1 3,916 Total outstanding impaired loans were $ 21.7 was $ 4.0 17.7 3.8 Changes in the accretable yield for purchased credit impaired loans were as follows at March 31, 2019 and 2018: March 31, March 31, ($ in thousands) Accretable Accretable Balance at beginning of period $ 3,835 $ 836 Reclassification from prior years - 859 Addition 379 49 Accretion (275 ) (143 ) Transfer from non-accretable 48 120 Payments received, net - - Charge-off - (10 ) Balance at end of period $ 3,987 $ 1,711 The following tables provide additional detail of impaired loans broken out according to class as of March 31, 2019 and December 31, 2018. The recorded investment included in the following tables represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. As nearly all of our impaired loans at March 31, 2019 are on nonaccrual status, recorded investment excludes any insignificant amount of accrued interest receivable on loans 90-days or more past due and still accruing. The unpaid balance represents the recorded balance prior to any partial charge-offs. March 31, 2019 Average Interest Recorded Income Recorded Unpaid Related Investment Recognized ($ in thousands) Investment Balance Allowance YTD YTD Impaired loans with no related allowance: Commercial, financial and agriculture $ 388 $ 470 $ - $ 682 $ 7 Commercial real estate 11,356 15,538 - 15,902 46 Consumer real estate 7,064 9,099 - 7,386 3 Consumer installment 47 57 - 74 - Total (1) $ 18,855 $ 25,164 $ - $ 24,044 $ 56 Impaired loans with a related allowance: Commercial, financial and agriculture $ 1,568 $ 1,568 $ 359 $ 1,264 $ 8 Commercial real estate 7,629 7,629 1,874 6,071 32 Consumer real estate 483 483 76 424 26 Consumer installment 75 75 27 50 - Total $ 9,755 $ 9,755 $ 2,336 $ 7,809 $ 66 Total Impaired Loans: Commercial, financial and agriculture $ 1,956 $ 2,038 $ 359 $ 1,946 $ 15 Commercial real estate 18,985 23,167 1,874 21,973 78 Consumer real estate 7,547 9,582 76 7,810 29 Consumer installment 122 132 27 125 - Total Impaired Loans $ 28,610 $ 34,919 $ 2,336 $ 31,854 $ 122 (1) – The total unpaid balance of impaired loans with no related allowance as of March 31, 2019 includes $ 21,702 As of March 31, 2019, the Company had $ 2.1 368 December 31, 2018 Average Interest Recorded Income Recorded Unpaid Related Investment Recognized ($ in thousands) Investment Balance Allowance YTD YTD Impaired loans with no related allowance: Commercial, financial and agriculture $ 894 $ 894 $ - $ 379 $ 27 Commercial real estate 18,046 19,775 - 7,685 427 Consumer real estate 6,215 6,530 - 4,522 69 Consumer installment 92 92 - 82 3 Total (1) $ 25,247 $ 27,291 $ - $ 12,668 $ 526 Impaired loans with a related allowance: Commercial, financial and agriculture $ 960 $ 960 $ 329 $ 968 $ 3 Commercial real estate 4,512 4,512 758 2,868 176 Consumer real estate 366 366 66 555 16 Consumer installment 26 26 26 24 - Total $ 5,864 $ 5,864 $ 1,179 $ 4,415 $ 195 Total Impaired Loans: Commercial, financial and agriculture $ 1,854 $ 1,854 $ 329 $ 1,347 $ 30 Commercial real estate 22,558 24,287 758 10,553 603 Consumer real estate 6,581 6,896 66 5,077 85 Consumer installment 118 118 26 106 3 Total Impaired Loans $ 31,111 $ 33,155 $ 1,179 $ 17,083 $ 721 (1) – as of December 31, 2018 includes $ 17,652 Interest 122 97 gross interest income that would have been recorded in the period that ended if the non-accrual loans had been current in accordance with their original terms and had been outstanding throughout the period or since origination, if held for part of the three months ended March 31, 2019 and March 31, 2018 and $ 409 86 Troubled Debt Restructuring If the Company grants a concession to a borrower in financial difficulty, the loan is classified as a troubled debt restructuring (“TDR”). There were 3 and 0 TDRs modified during the three months ended March 31, 2019 and 2018, respectively. The balance of TDRs was $ 17.0 14.3 2.7 215 The following tables set forth the amounts and past due status for the Company’s TDRs at March 31, 2019 and December 31, 2018: ($ in thousands) March 31, 2019 Current Loans Past Due 30-89 Past Due 90 days and still accruing Non- accrual Total Commercial, financial and agriculture $ 851 $ - $ - $ 17 $ 868 Commercial real estate 5,696 - - 5,208 10,904 Residential real estate 1,416 423 - 3,390 5,229 Consumer installment 31 - - - 31 Total $ 7,994 $ 423 $ - $ 8,615 $ 17,032 Allowance for loan losses $ 106 $ 11 $ - $ 98 $ 215 ($ in thousands) December 31, 2018 Current Loans Past Due 30-89 Past Due 90 days and still accruing Non- accrual Total Commercial, financial and agriculture $ 13 $ 646 $ - $ 18 $ 676 Commercial real estate 4,827 - - 5,425 10,252 Residential real estate 442 86 - 2,801 3,329 Consumer installment 25 - - 13 38 Total $ 5,307 $ 732 $ - $ 8,257 $ 14,295 Allowance for loan losses $ 80 $ 13 $ - $ 110 $ 203 A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There was 1 loan which totaled $10 thousand and 12 loans which totaled $4.3 million that were modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the quarters ending March 31, 2019 and March 31, 2018, respectively. Internal Risk Ratings The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance: Special Mention Substandard Doubtful Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of March 31, 2019 and December 31, 2018, and based on the most recent analysis performed, the risk categories of loans by class of loans (excluding mortgage loans held for sale) were as follows: March 31, 2019 ($ in thousands) Commercial, Financial and Agriculture Commercial Real Estate Consumer Real Estate Installment and Other Total Pass $ 335,338 $ 1,467,336 $ 437,811 $ 33,225 $ 2,273,710 Special Mention 792 9,216 2,023 29 12,060 Substandard 3,129 34,351 12,645 474 50,599 Doubtful 14 83 - - 97 Subtotal 339,273 1,510,986 452,479 33,728 2,336,466 Less: Unearned discount - 1,118 - - 1,118 Loans, net of unearned discount $ 339,273 $ 1,509,868 $ 452,479 $ 33,728 $ 2,335,348 December 31, 2018 ($ in thousands) Commercial, Financial and Agriculture Commercial Real Estate Consumer Real Estate Installment and Other Total Pass $ 300,685 $ 1,286,151 $ 377,028 $ 34,127 $ 1,997,991 Special Mention 842 12,401 1,962 13 15,218 Substandard 2,640 33,856 10,959 270 47,725 Doubtful 16 85 - - 101 Subtotal 304,183 1,332,493 389,949 34,410 2,061,035 Less: Unearned discount - 613 - - 613 Loans, net of unearned discount $ 304,183 $ 1,331,880 $ 389,949 $ 34,410 $ 2,060,422 Allowance for Loan Losses Activity in the allowance for loan losses for the period was as follows: Three Months Three Months Ended Ended ($ in thousands) March 31, 2019 March 31, 2018 Balance at beginning of period $ 10,065 $ 8,288 Loans charged-off: Commercial, Financial and Agriculture (4 ) - Real Estate (42 ) (4 ) Installment and Other (29 ) (19 ) Total (75 ) (23 ) Recoveries on loans previously charged-off: Commercial, Financial and Agriculture 13 8 Real Estate 29 22 Installment and Other 80 87 Total 122 117 Net recovery 47 94 Provision for Loan Losses 1,123 277 Balance at end of period $ 11,235 $ 8,659 The following March 31, 2019 Commercial Financial Commercial Consumer Installment ($ in thousands) and Agriculture Real Estate Real Estate and Other Total Loans Individually evaluated $ 1,738 $ 8,283 $ 799 $ 75 $ 10,895 Collectively evaluated 337,317 1,529,183 406,632 33,606 $ 2,306,738 PCI loans 218 10,702 6,748 47 17,715 Total $ 339,273 $ 1,548,168 $ 414,179 $ 33,728 $ 2,335,348 Allowance for Loan Losses Individually evaluated $ 358 $ 1,875 $ 76 $ 27 $ 2,336 Collectively evaluated 1,221 5,396 128 2,154 8,899 Total $ 1,579 $ 7,271 $ 204 $ 2,181 $ 11,235 December 31, 2018 Commercial Financial Commercial Consumer Installment ($ in thousands) and Agriculture Real Estate Real Estate and Other Total Loans Individually evaluated $ 1,657 $ 10,932 $ 804 $ 66 $ 13,459 Collectively evaluated 302,329 1,309,322 383,368 34,292 2,029,311 PCI loans 197 11,626 5,777 52 17,652 Total $ 304,183 $ 1,331,880 $ 389,949 $ 34,410 $ 2,060,422 Allowance for Loan Losses Individually evaluated $ 329 $ 758 $ 66 $ 26 $ 1,179 Collectively evaluated 1,731 5,303 1,677 175 8,886 Total $ 2,060 $ 6,061 $ 1,743 $ 201 $ 10,065 |