Loans and Leases (Tables)

12 Months Ended

Dec. 31, 2015

Summary of Major Loan and Lease Categories



	At December 31, 2015								At December 31, 2014
(Dollars in thousands)	Originated			Acquired		Total			Total
Commercial, financial and agricultural	$	479,980		$	24,535	$	504,515		$	457,827
Real estate-commercial	759,342			126,550		885,892			628,478
Real estate-construction	91,904			4,637		96,541			79,887
Real estate-residential secured for business purpose	94,280			124,503		218,783			36,932
Real estate-residential secured for personal purpose	177,850			3,305		181,155			166,850
Real estate-home equity secured for personal purpose	125,361			11,594		136,955			108,250
Loans to individuals	29,406			326		29,732			29,941
Lease financings	125,440			—		125,440			118,460
Total loans and leases held for investment, net of deferred income	$	1,883,563		$	295,450	$	2,179,013		$	1,626,625

Unearned lease income, included in the above table	$	(13,829	)	$	—	$	(13,829	)	$	(14,131	)
Net deferred costs, included in the above table	4,244			—		4,244			3,218
Overdraft deposits included in the above table	35			—		35			50

Impaired Loans

The following is a summary of the acquired impaired loans at January 1, 2015 resulting from the acquisition with Valley Green:



(Dollars in thousands)

Contractually required principal and interest payments	$	7,377
Contractual cash flows not expected to be collected (nonaccretable difference)	(5,344		)
Cash flows expected to be collected	2,033
Interest component of expected cash flows (accretable difference)	(305		)
Fair value of loans acquired with a deterioration of credit quality	$	1,728

The outstanding principal balance and carrying amount for acquired credit impaired loans at December 31, 2015 were as follows:



(Dollars in thousands)	At December 31, 2015
Outstanding principal balance	$	3,551
Carrying amount	1,253
Allowance for loan losses	8

The following table presents the changes in accretable yield on acquired credit impaired loans:



(Dollars in thousands)	For the Year Ended December 31, 2015
Beginning of period	$	—
Acquisition of credit impaired loans	305
Reclassification from nonaccretable difference	574
Accretable yield amortized to interest income	(717		)
Disposals	(18		)
End of period	$	144

The following presents, by class of loans, the recorded investment and unpaid principal balance of impaired loans, the amounts of the impaired loans for which there is not an allowance for credit losses and the amounts for which there is an allowance for credit losses at December 31, 2015 and 2014. The impaired loans exclude loans acquired with deteriorated credit quality.



	At December 31,
	2015						2014
(Dollars in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans with no related allowance recorded:
Commercial, financial and agricultural	$	10,337	$	13,318			$	12,628	$	13,050
Real estate—commercial real estate	30,088		30,996				29,779		30,810
Real estate—construction	—		—				5,931		6,474
Real estate—residential secured for business purpose	4,597		4,717				3,008		3,044
Real estate—residential secured for personal purpose	545		554				512		547
Real estate—home equity secured for personal purpose	170		170				184		184
Total impaired loans with no related allowance recorded	$	45,737	$	49,755			$	52,042	$	54,109

Impaired loans with an allowance recorded:
Commercial, financial and agricultural	$	2,544	$	2,544	$	208	$	3,933	$	3,935	$	920
Real estate—commercial real estate	—		—		—		216		216		78
Real estate—residential secured for business purpose	295		295		45		—		—		—
Real estate—residential secured for personal purpose	252		252		16		—		—		—
Real estate—home equity secured for personal purpose	105		105		53		—		—		—
Total impaired loans with an allowance recorded	$	3,196	$	3,196	$	322	$	4,149	$	4,151	$	998

Total impaired loans:
Commercial, financial and agricultural	$	12,881	$	15,862	$	208	$	16,561	$	16,985	$	920
Real estate—commercial real estate	30,088		30,996		—		29,995		31,026		78
Real estate—construction	—		—		—		5,931		6,474		—
Real estate—residential secured for business purpose	4,892		5,012		45		3,008		3,044		—
Real estate—residential secured for personal purpose	797		806		16		512		547		—
Real estate—home equity secured for personal purpose	275		275		53		184		184		—
Total impaired loans	$	48,933	$	52,951	$	322	$	56,191	$	58,260	$	998

Schedule of Future Minimum Lease Payments for Capital Leases

At December 31, 2015 and 2014, the schedule of minimum lease payments receivable is as follows:



	At December 31,
(Dollars in thousands)	2015			2014
Within 1 year	$	54,093		$	50,340
After 1 year through 2 years	40,250			38,084
After 2 years through 3 years	25,940			25,888
After 3 years through 4 years	13,914			13,667
After 4 years through 5 years	4,853			4,312
Thereafter	219			300
Total future minimum lease payments receivable	139,269			132,591
Less: Unearned income	(13,829		)	(14,131		)
Total lease financing receivables, net of unearned income	$	125,440		$	118,460

Age Analysis of Past Due Loans and Leases

The following presents, by class of loans and leases, an aging of past due loans and leases, loans and leases which are current and the recorded investment in loans and leases 90 days or more past due which are accruing interest at December 31, 2015 and 2014:



(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90 Days or more Past Due		Total Past Due		Current		Acquired Credit Impaired		Total Loans and Leases Held for Investment		Recorded Investment 90 Days or more Past Due and Accruing Interest
At December 31, 2015
Commercial, financial and agricultural	$	864	$	298	$	4,279	$	5,441	$	498,757	$	317	$	504,515	$	—
Real estate—commercial real estate and construction:
Commercial real estate	12,103		—		1,102		13,205		872,174		513		885,892		—
Construction	—		—		—		—		96,541		—		96,541		—
Real estate—residential and home equity:
Residential secured for business purpose	1,406		2,356		727		4,489		213,871		423		218,783		—
Residential secured for personal purpose	990		69		309		1,368		179,787		—		181,155		—
Home equity secured for personal purpose	777		52		174		1,003		135,952		—		136,955		—
Loans to individuals	198		97		173		468		29,264		—		29,732		173
Lease financings	1,294		652		646		2,592		122,848		—		125,440		206
Total	$	17,632	$	3,524	$	7,410	$	28,566	$	2,149,194	$	1,253	$	2,179,013	$	379

At December 31, 2014
Commercial, financial and agricultural	$	145	$	747	$	2,567	$	3,459	$	454,368	$	—	$	457,827	$	—
Real estate—commercial real estate and construction:
Commercial real estate	361		913		1,163		2,437		626,041		—		628,478		—
Construction	—		405		5,525		5,930		73,957		—		79,887		—
Real estate—residential and home equity:
Residential secured for business purpose	167		56		713		936		35,996		—		36,932		—
Residential secured for personal purpose	409		604		60		1,073		165,777		—		166,850		—
Home equity secured for personal purpose	348		—		215		563		107,687		—		108,250		31
Loans to individuals	365		65		365		795		29,146		—		29,941		365
Lease financings	1,610		406		435		2,451		116,009		—		118,460		55
Total	$	3,405	$	3,196	$	11,043	$	17,644	$	1,608,981	$	—	$	1,626,625	$	451

Non-Performing Loans and Leases

The following presents, by class of loans and leases, non-performing loans and leases at December 31, 2015 and 2014:



	At December 31,
	2015								2014
(Dollars in thousands)	Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Non- Performing Loans and Leases		Nonaccrual Loans and Leases*		Accruing Troubled Debt Restructured Loans and Lease Modifications		Loans and Leases 90 Days or more Past Due and Accruing Interest		Total Non- Performing Loans and Leases
Commercial, financial and agricultural	$	6,915	$	1,602	$	—	$	8,517	$	5,002	$	2,851	$	—	$	7,853
Real estate—commercial real estate and construction:
Commercial real estate	4,314		2,449		—		6,763		4,413		2,618		—		7,031
Construction	—		—		—		—		5,931		—		—		5,931
Real estate—residential and home equity:
Residential secured for business purpose	1,863		763		—		2,626		915		—		—		915
Residential secured for personal purpose	376		421		—		797		512		—		—		512
Home equity secured for personal purpose	275		—		—		275		184		—		31		215
Loans to individuals	—		—		173		173		—		—		365		365
Lease financings	440		10		206		656		380		—		55		435
Total	$	14,183	$	5,245	$	379	$	19,807	$	17,337	$	5,469	$	451	$	23,257

* Includes nonaccrual troubled debt restructured loans and lease modifications of $93 thousand and $3.1 million at December 31, 2015 and December 31, 2014, respectively.

Credit Quality Indicators

The following tables present by class, the recorded investment in loans and leases held for investment by credit quality indicator at December 31, 2015 and 2014.

The Corporation employs a ten (10) grade risk rating system related to the credit quality of commercial loans and residential real estate loans secured for a business purpose of which the first six categories are pass categories (credits not adversely rated). The following is a description of the internal risk ratings and the likelihood of loss related to each risk rating. Loans with risk ratings of one through five are reviewed based on the relationship dollar amount with the borrower: loans with a relationship total of $2.5 million or greater are reviewed quarterly; loans with a relationship balance of less than $2.5 million but greater than $500 thousand are reviewed annually based on the borrower’s fiscal year; loans with a relationship balance of less than $500 thousand are reviewed only if the loan becomes 60 days or more past due. Loans with a risk rating of six are also reviewed based on the relationship dollar amount with the borrower: loans with a relationship balance of $2.0 million or greater are reviewed quarterly; loans with a relationship balance of less than $2.0 million but greater than $500 thousand are reviewed annually; loans with a relationship balance of less than $500 thousand are reviewed only if the loan becomes 60 days or more past due. Loans with a risk rating of seven are reviewed at least quarterly, and as often as monthly, at management’s discretion. Loans with risk ratings of eight through ten are reviewed monthly.


1.	Cash Secured—No credit risk


2.	Fully Secured—Negligible credit risk


3.	Strong—Minimal credit risk


4.	Satisfactory—Nominal credit risk


5.	Acceptable—Moderate credit risk


6.	Pre-Watch—Marginal, but stable credit risk


7.	Special Mention—Potential weakness


8.	Substandard—Well-defined weakness


9.	Doubtful—Collection in-full improbable


10.	Loss—Considered uncollectible

Commercial Credit Exposure Credit Risk by Internally Assigned Grades

The following table presents classifications for originated loans:



(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial		Real Estate— Construction		Real Estate— Residential Secured for Business Purpose		Total
At December 31, 2015
Grade:
1. Cash secured/ 2. Fully secured	$	968	$	—	$	5,417	$	—	$	6,385
3. Strong	17,328		10,877		—		—		28,205
4. Satisfactory	36,697		36,023		450		9		73,179
5. Acceptable	328,140		530,766		72,630		78,659		1,010,195
6. Pre-watch	61,098		119,117		13,262		7,161		200,638
7. Special Mention	6,074		20,286		—		2,347		28,707
8. Substandard	29,675		42,273		145		6,104		78,197
9. Doubtful	—		—		—		—		—
10. Loss	—		—		—		—		—
Total	$	479,980	$	759,342	$	91,904	$	94,280	$	1,425,506

At December 31, 2014
Grade:
1. Cash secured/ 2. Fully secured	$	4,248	$	—	$	1,262	$	—	$	5,510
3. Strong	14,013		8,504		3,897		—		26,414
4. Satisfactory	23,931		30,587		8,731		339		63,588
5. Acceptable	301,425		402,719		55,111		24,535		783,790
6. Pre-watch	65,993		123,129		4,956		5,384		199,462
7. Special Mention	7,166		17,505		—		1,304		25,975
8. Substandard	41,051		46,034		5,930		5,370		98,385
9. Doubtful	—		—		—		—		—
10. Loss	—		—		—		—		—
Total	$	457,827	$	628,478	$	79,887	$	36,932	$	1,203,124



(Dollars in thousands)	Real Estate— Residential Secured for Personal Purpose		Real Estate— Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financing		Total
At December 31, 2015
Performing	$	177,053	$	125,086	$	29,233	$	124,784	$	456,156
Nonperforming	797		275		173		656		1,901
Total	$	177,850	$	125,361	$	29,406	$	125,440	$	458,057

At December 31, 2014
Performing	$	166,338	$	108,035	$	29,576	$	118,025	$	421,974
Nonperforming	512		215		365		435		1,527
Total	$	166,850	$	108,250	$	29,941	$	118,460	$	423,501

Reserve for Loan and Lease Losses and Recorded Investment in Loans and Leases

The following presents, by portfolio segment, a summary of the activity in the reserve for loan and lease losses for the years ended December 31, 2015, 2014 and 2013:



(Dollars in thousands)	Commercial, Financial and Agricultural			Real Estate— Commercial and Construction			Real Estate— Residential Secured for Business Purpose			Real Estate— Residential and Home Equity Secured for Personal Purpose			Loans to Individuals			Lease Financings			Unallocated			Total
For the Year Ended December 31, 2015
Reserve for loan and lease losses:
Beginning balance	$	6,920		$	8,943		$	763		$	1,124		$	360		$	985		$	1,567		$	20,662
Charge-offs*	(4,793		)	(1,895		)	(179		)	(279		)	(549		)	(801		)	N/A			(8,496		)
Recoveries	1,032			200			28			10			176			214			N/A			1,660
Provision (recovery of provision)	3,259			(684		)	43			657			359			644			(655		)	3,623
Provision for acquired credit impaired loans	—			8			108			63			—			—			—			179
Ending balance	$	6,418		$	6,572		$	763		$	1,575		$	346		$	1,042		$	912		$	17,628

For the Year Ended December 31, 2014
Reserve for loan and lease losses:
Beginning balance	$	9,789		$	8,780		$	1,062		$	1,284		$	694		$	1,285		$	1,600		$	24,494
Charge-offs	(2,834		)	(4,363		)	(140		)	(141		)	(796		)	(576		)	N/A			(8,850		)
Recoveries	247			524			60			34			265			281			N/A			1,411
(Recovery of provision) provision	(282		)	4,002			(219		)	(53		)	197			(5		)	(33		)	3,607
Ending balance	$	6,920		$	8,943		$	763		$	1,124		$	360		$	985		$	1,567		$	20,662


For the Year Ended December 31, 2013
Reserve for loan and lease losses:
Beginning balance	$	11,594		$	7,507		$	639		$	980		$	679		$	1,326		$	2,021		$	24,746
Charge-offs	(3,213		)	(8,667		)	(112		)	(195		)	(641		)	(791		)	N/A			(13,619		)
Recoveries	320			1,104			13			13			174			515			N/A			2,139
Provision (recovery of provision)	1,088			8,836			522			486			482			235			(421		)	11,228
Ending balance	$	9,789		$	8,780		$	1,062		$	1,284		$	694		$	1,285		$	1,600		$	24,494

* Includes charge-offs of $1.3 million on two real estate construction loans for one borrower which were subsequently transferred to loans held for sale in the second quarter of 2015 and sold in the fourth quarter of 2015.

N/A – Not applicable

The following presents, by portfolio segment, the balance in the reserve for loan and lease losses disaggregated on the basis of impairment method and the recorded investment in loans and leases disaggregated on the basis of impairment method at December 31, 2015 and 2014:



(Dollars in thousands)	Commercial, Financial and Agricultural		Real Estate— Commercial and Construction		Real Estate— Residential Secured for Business Purpose		Real Estate— Residential and Home Equity Secured for Personal Purpose		Loans to Individuals		Lease Financings		Unallocated		Total
At December 31, 2015

Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	208	$	—	$	45	$	69	$	—	$	—	N/A		$	322
Ending balance: collectively evaluated for impairment	6,210		6,564		718		1,506		346		1,042		912		17,298
Ending balance: acquired credit impaired loans evaluated for impairment	—		8		—		—		—		—		—		8
Total ending balance	$	6,418	$	6,572	$	763	$	1,575	$	346	$	1,042	$	912	$	17,628

Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	12,881	$	30,088	$	4,892	$	1,072	$	—	$	—			$	48,933
Ending balance: collectively evaluated for impairment	467,099		821,158		89,388		302,139		29,406		125,440				1,834,630
Acquired non-credit impaired loans	24,218		130,674		124,080		14,899		326		—				294,197
Acquired credit impaired loans	317		513		423		—		—		—				1,253
Total ending balance	$	504,515	$	982,433	$	218,783	$	318,110	$	29,732	$	125,440			$	2,179,013

At December 31, 2014

Reserve for loan and lease losses:
Ending balance: individually evaluated for impairment	$	920	$	78	$	—	$	—	$	—	$	—	N/A		$	998
Ending balance: collectively evaluated for impairment	6,000		8,865		763		1,124		360		985		1,567		19,664
Total ending balance	$	6,920	$	8,943	$	763	$	1,124	$	360	$	985	$	1,567	$	20,662


Loans and leases held for investment:
Ending balance: individually evaluated for impairment	$	16,561	$	35,926	$	3,008	$	696	$	—	$	—			$	56,191
Ending balance: collectively evaluated for impairment	441,266		672,439		33,924		274,404		29,941		118,460				1,570,434
Total ending balance	$	457,827	$	708,365	$	36,932	$	275,100	$	29,941	$	118,460			$	1,626,625

N/A – Not applicable

Average Recorded Investment in Impaired Loans and Leases and Analysis of Interest on Impaired Loans

The following presents by class of loans, the average recorded investment in impaired loans and an analysis of interest on impaired loans. A loan may remain on accrual status if it is in the process of collection and is either guaranteed or well secured. Therefore, interest income on accruing impaired loans is recognized using the accrual method.



	For the Years Ended December 31,
	2015						2014						2013
(Dollars in thousands)	Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms		Average Recorded Investment		Interest Income Recognized*		Additional Interest Income That Would Have Been Recognized Under Original Terms
Loans held for sale	$	1,832	$	—	$	110	$	—	$	—	$	—	$	—	$	—	$	—
Loans held for investment:
Commercial, financial and agricultural	15,383		423		481		15,334		540		258		6,412		172		200
Real estate—commercial real estate	23,692		996		330		26,662		1,143		323		25,728		837		717
Real estate—construction	3,164		—		162		10,412		103		463		14,621		124		680
Real estate—residential secured for business purpose	3,805		144		161		2,524		77		61		672		19		10
Real estate—residential secured for personal purpose	729		2		43		719		—		49		760		—		45
Real estate—home equity secured for personal purpose	184		—		11		106		—		10		8		—		—
Loans to individuals	—		—		—		4		—		—		40		4		—
Total	$	48,789	$	1,565	$	1,298	$	55,761	$	1,863	$	1,164	$	48,241	$	1,156	$	1,652


*	Includes interest income recognized on a cash basis for nonaccrual loans of $37 thousand, $23 thousand and $6 thousand for the years ended December 31, 2015, 2014 and 2013, respectively and interest income recognized on the accrual method for accruing impaired loans of $1.5 million, $1.8 million and $1.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Troubled Debt Restructured Loans

The following presents, by class of loans, information regarding consumer mortgages collateralized by residential real estate property that are in the process of foreclosure at December 31, 2015 and 2014:



(Dollars in thousands)	At December 31, 2015		At December 31, 2014
Real estate-residential secured for personal purpose	$	313	$	62
Real estate-home equity secured for personal purpose	60		—
Total	$	373	$	62

The following presents, by class of loans, information regarding accruing and nonaccrual loans that were restructured during the years ended December 31, 2015 and 2014:



	For the Years Ended December 31,
	2015							2014
(Dollars in thousands)	Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Allowance		Number of Loans	Pre- Restructuring Outstanding Recorded Investment		Post- Restructuring Outstanding Recorded Investment		Related Allowance
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	4	$	1,140	$	1,140	$	—	6	$	1,824	$	1,824	$	507
Real estate—commercial real estate	1	405		405		—		1	1,000		1,000		—
Real estate—residential secured for business purpose	1	353		353		—		—	—		—		—
Total	6	$	1,898	$	1,898	$	—	7	$	2,824	$	2,824	$	507

Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	122	$	122	$	22	—	$	—	$	—	$	—
Real estate—commercial real estate	—	—		—		—		1	50		50		—
Real estate—residential secured for business purpose	—	—		—		—		2	688		688		—
Total	1	$	122	$	122	$	22	3	$	738	$	738	$	—

Concessions Granted on Accruing and Nonaccrual Loans Restructured

The following presents, by class of loans, information regarding the types of concessions granted on accruing and nonaccrual loans that were restructured during the years ended December 31, 2015 and 2014:



	Temporary Payment Reduction			Interest Rate Reduction			Maturity Date Extension			Payments Suspended			Amortization Period Extension			Total Concessions Granted
(Dollars in thousands)	No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount		No. of Loans	Amount
For the Year Ended December 31, 2015
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	143	—	$	—	1	$	500	—	$	—	2	$	497	4	$	1,140
Real estate—commercial real estate	—	—		—	—		—	—		—	—		1	405		1	405
Real estate—residential secured for business purpose	1	353		—	—		—	—		—	—		—	—		1	353
Total	2	$	496	—	$	—	1	$	500	—	$	—	3	$	902	6	$	1,898

Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	122	—	$	—	—	$	—	—	$	—	—	$	—	1	$	122
Total	1	$	122	—	$	—	—	$	—	—	$	—	—	$	—	1	$	122

For the Year Ended December 31, 2014
Accruing Troubled Debt Restructured Loans:
Commercial, financial and agricultural	—	$	—	—	$	—	5	$	1,699	1	$	125	—	$	—	6	$	1,824
Real estate—commercial real estate	—	—		—	—		1	1,000		—	—		—	—		1	1,000
Total	—	$	—	—	$	—	6	$	2,699	1	$	125	—	$	—	7	$	2,824


Nonaccrual Troubled Debt Restructured Loans:
Real estate—commercial real estate	—	$	—	1	$	50	—	$	—	—	$	—	—	$	—	1	$	50
Real estate—residential secured for business purpose	—	—		1	55		1	633		—	—		—	—		2	688
Total	—	$	—	2	$	105	1	$	633	—	$	—	—	$	—	3	$	738

Accruing and Nonaccrual Troubled Debt Restructured Loans with Payment Defaults

The following presents, by class of loans, information regarding accruing and nonaccrual troubled debt restructured loans, for which there were payment defaults within twelve months of the restructuring date:



	For the Years Ended December 31,
	2015			2014
(Dollars in thousands)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Accruing Troubled Debt Restructured Loans:
Total	—	$	—	—	$	—
Nonaccrual Troubled Debt Restructured Loans:
Commercial, financial and agricultural	1	$	143	—	$	—
Total	1	$	143	—	$	—