Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2018

Schedule of Accounts, Notes, Loans and Financing Receivable

At June 30, 2018 and December 31, 2017, loans are summarized as follows (in thousands):



	June 30, 2018									December 31, 2017
	PCI Loans¹			All Other Loans			Total			PCI Loans¹			All Other Loans			Total
Commercial real estate	$	18,474		$	727,390		$	745,864		$	17,903		$	625,085		$	642,988
Consumer real estate	6,987			348,889			355,876			7,450			286,007			293,457
Construction and land development	5,690			173,741			179,431			5,120			130,289			135,409
Commercial and industrial	821			278,950			279,771			858			237,229			238,087
Consumer and other	686			13,807			14,493			1,463			11,854			13,317
Total loans	32,658			1,542,777			1,575,435			32,794			1,290,464			1,323,258
Less: Allowance for loan losses	(19		)	(7,055		)	(7,074		)	(16		)	(5,844		)	(5,860		)
Loans, net	$	32,639		$	1,535,722		$	1,568,361		$	32,778		$	1,284,620		$	1,317,398

¹ Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.

Schedule of Impaired and Performing Loans Receivable

The composition of loans by loan classification for impaired and performing loan status at June 30, 2018 and December 31, 2017, is summarized in the tables below (in thousands):



	June 30, 2018
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	726,356	$	347,893	$	173,194	$	278,431	$	13,698	$	1,539,572
Impaired loans	1,034		996		547		519		109		3,205
	727,390		348,889		173,741		278,950		13,807		1,542,777
PCI loans	18,474		6,987		5,690		821		686		32,658
Total	$	745,864	$	355,876	$	179,431	$	279,771	$	14,493	$	1,575,435



	December 31, 2017
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	624,638	$	284,585	$	129,742	$	237,016	$	11,842	$	1,287,823
Impaired loans	447		1,422		547		213		12		2,641
	625,085		286,007		130,289		237,229		11,854		1,290,464
PCI loans	17,903		7,450		5,120		858		1,463		32,794
Total loans	$	642,988	$	293,457	$	135,409	$	238,087	$	13,317	$	1,323,258

Schedule of Allowance for Loan Losses for Impaired and Performing Loans Receivable

The following tables show the allowance for loan losses allocation by loan classification for impaired, PCI, and performing loans as of June 30, 2018 and December 31, 2017 (in thousands):



	June 30, 2018
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	3,116	$	1,491	$	744	$	1,145	$	224	$	6,720
PCI loans	19		—		—		—		—		19
Impaired loans	—		37		—		222		76		335
Total	$	3,135	$	1,528	$	744	$	1,367	$	300	$	7,074



	December 31, 2017
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	2,444	$	1,340	$	521	$	890	$	204	$	5,399
PCI loans	16		—		—		—		—		16
Impaired loans	5		256		—		172		12		445
Total	$	2,465	$	1,596	$	521	$	1,062	$	216	$	5,860

Schedule of Financing Receivable Allowance for Credit Losses

The following tables detail the changes in the allowance for loan losses for the six month period ending June 30, 2018 and year ending December 31, 2017, by loan classification (in thousands):



	June 30, 2018
	Commercial Real Estate			Consumer Real Estate			Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Beginning balance	$	2,465		$	1,596		$	521	$	1,062		$	216		$	5,860
Loans charged off	(38		)	(25		)	—		(78		)	(101		)	(242		)
Recoveries of loans charged off	—			50			5		56			40			151
Provision (reallocation) charged to expense	708			(93		)	218		327			145			1,305
Ending balance	$	3,135		$	1,528		$	744	$	1,367		$	300		$	7,074



	December 31, 2017
	Commercial Real Estate		Consumer Real Estate			Construction and Land Development			Commercial and Industrial			Consumer and Other			Total
Beginning balance	$	2,369	$	1,382		$	717		$	520		$	117		$	5,105
Loans charged off	—		(111		)	—			(24		)	(141		)	(276		)
Recoveries of charge-offs	8		99			13			67			61			248
Provision (reallocation) charged to expense	88		226			(209		)	499			179			783
Ending balance	$	2,465	$	1,596		$	521		$	1,062		$	216		$	5,860

Financing Receivable Credit Quality Indicators

The following tables outline the amount of each loan classification and the amount categorized into each risk rating as of June 30, 2018 and December 31, 2017 (in thousands):



	June 30, 2018
Non PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	724,763	$	343,407	$	172,972	$	277,384	$	13,184	$	1,531,710
Watch	1,604		3,168		62		1,035		123		5,992
Special mention	—		949		160		35		363		1,507
Substandard	1,023		1,365		547		483		111		3,529
Doubtful	—		—		—		13		26		39
Total	$	727,390	$	348,889	$	173,741	$	278,950	$	13,807	$	1,542,777



PCI Loans
Pass	$	14,494	$	4,558	$	3,973	$	210	$	565	$	23,800
Watch	1,513		898		653		2		18		3,084
Special mention	1,393		575		716		153		17		2,854
Substandard	1,074		956		348		456		86		2,920
Doubtful	—		—		—		—		—		—
Total	$	18,474	$	6,987	$	5,690	$	821	$	686	$	32,658
Total loans	$	745,864	$	355,876	$	179,431	$	279,771	$	14,493	$	1,575,435

Note 5. Loans and Allowance for Loan Losses, Continued

Credit Risk Management (continued):



	December 31, 2017
Non PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	616,028	$	279,464	$	129,359	$	233,942	$	11,624	$	1,270,417
Watch	7,673		2,543		383		3,007		62		13,668
Special mention	1,006		2,627		—		64		155		3,852
Substandard	378		1,159		547		157		—		2,241
Doubtful	—		214		—		59		13		286
Total	$	625,085	$	286,007	$	130,289	$	237,229	$	11,854	$	1,290,464



PCI Loans
Pass	$	14,386	$	4,151	$	4,134	$	68	$	819	$	23,558
Watch	261		1,345		649		120		262		2,637
Special mention	—		456		—		58		24		538
Substandard	3,084		1,192		337		588		107		5,308
Doubtful	172		306		—		24		251		753
Total	$	17,903	$	7,450	$	5,120	$	858	$	1,463	$	32,794
Total loans	$	642,988	$	293,457	$	135,409	$	238,087	$	13,317	$	1,323,258

Past Due Financing Receivables

The following tables present the aging of the recorded investment in loans as of June 30, 2018 and December 31, 2017 (in thousands):



	June 30, 2018
	30-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	2,628	$	82	$	6	$	2,716	$	18,474	$	724,674	$	745,864
Consumer real estate	701		76		463		1,240		6,987		347,649		355,876
Construction and land development	403		338		547		1,288		5,690		172,453		179,431
Commercial and industrial	647		113		430		1,190		821		277,760		279,771
Consumer and other	189		58		92		339		686		13,468		14,493
Total	$	4,568	$	667	$	1,538	$	6,773	$	32,658	$	1,536,004	$	1,575,435

Note 5. Loans and Allowance for Loan Losses, Continued

Past Due Loans (continued):



	December 31, 2017
	30-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	517	$	728	$	128	$	1,373	$	17,903	$	623,712	$	642,988
Consumer real estate	963		33		991		1,987		7,450		284,020		293,457
Construction and land development	65		326		547		938		5,120		129,351		135,409
Commercial and industrial	286		131		85		502		858		236,727		238,087
Consumer and other	165		291		13		469		1,463		11,385		13,317
Total	$	1,996	$	1,509	$	1,764	$	5,269	$	32,794	$	1,285,195	$	1,323,258

Impaired Financing Receivables

The following is an analysis of the impaired loan portfolio, excluding PCI loans, detailing the related allowance recorded as of June 30, 2018 and December 31, 2017 (in thousands):



							For the six months ended
	At June 30, 2018						June 30, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	1,034	$	1,043	$	—	$	670	$	15
Consumer real estate	793		823		—		699		12
Construction and land development	547		547		—		547		—
Commercial and industrial	81		83		—		58		3
Consumer and other	16		16		—		5		—
	2,471		2,512		—		1,979		30
Impaired loans with a valuation allowance:
Commercial real estate	—		—		—		8		—
Consumer real estate	203		216		37		642		11
Construction and land development	—		—		—		—		—
Commercial and industrial	438		440		222		257		5
Consumer and other	93		95		76		72		2
	734		751		335		979		18
PCI loans:
Commercial real estate	27		127		19		5		3
Total impaired loans	$	3,232	$	3,390	$	354	$	2,963	$	51

Note 5. Loans and Allowance for Loan Losses, Continued

Impaired Loans (continued):



							For the year ended
	At December 31, 2017						December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	424	$	454	$	—	$	204	$	44
Consumer real estate	415		420		—		401		16
Construction and land development	547		547		—		628		—
Commercial and industrial	41		41		—		44		3
Consumer and other	—		—		—		—		—
	1,427		1,462		—		1,277		63
Impaired loans with a valuation allowance:
Commercial real estate	23		23		5		5		1
Consumer real estate	1,007		1,033		256		601		38
Construction and land development	—		—		—		—		—
Commercial and industrial	172		172		172		117		10
Consumer and other	12		13		12		2		1
	1,214		1,241		445		725		50
PCI loans:
Commercial real estate	16		123		16		3		16
Total impaired loans	$	2,657	$	2,826	$	461	$	2,005	$	129

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period, Carrying Amount of Loans

The Company has acquired loans which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of is as follows (in thousands):



	June 30, 2018			December 31, 2017
Commercial real estate	$	25,700		$	23,366
Consumer real estate	9,620			10,764
Construction and land development	6,793			6,285
Commercial and industrial	2,973			1,452
Consumer and other	1,014			1,710
Total loans	46,100			43,577
Less remaining purchase discount	(13,442		)	(10,783		)
Total loans, net of purchase discount	32,658			32,794
Less: Allowance for loan losses	(19		)	(16		)
Carrying amount, net of allowance	$	32,639		$	32,778

Schedule of Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement

Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows for the three and six months period ended June 30, 2018 and 2017 (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Accretable yield, beginning of period	$	7,780		$	8,482		$	9,287		$	8,950
Additions	1,292			—			1,292			—
Accretion income	(1,928		)	(973		)	(3,029		)	(1,670		)
Reclassification to accretable	120			366			382			610
Other changes, net	(58		)	600			(726		)	585
Accretable yield	$	7,206		$	8,475		$	7,206		$	8,475

Schedule of Certain Loans Acquired Accounted For As Debt Securities Acquired During Period

Purchased credit impaired loans acquired from Southern Community Bank during the three and six months period ended June 30, 2018 for which it was probable at acquisition that all contractually required payments would not be collected are as follows (in thousands):



	Three and Six Months Ended June 30,
	2018
Contractual principal and interest at acquisition	$	15,133
Nonaccretable difference	5,302
Expected cash flows at acquisition	9,831
Accretable yield	1,292
Fair value of purchased credit impaired loans	$	8,539