LOANS

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

LOANS

NOTE 4 – LOANS

The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank purchased residential mortgage loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. During the third quarter of 2016, the Bank began purchasing from unrelated third parties consumer installment home improvement loans made to borrowers throughout the United States. As of September 30, 2019 and December 31, 2018, the net carrying value of these consumer installment home improvement loans was approximately $404.7 million and $399.9 million, respectively, and such loans are reported in the consumer installment loan category. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began to originate, administer and service these types of loans. As of September 30, 2019 and December 31, 2018, the net carrying value of commercial insurance premium loans was approximately $648.7 million and $413.5 million, respectively, and such loans are reported in the commercial, financial and agricultural loan category.

The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, commercial insurance premium finance, and other business purposes. Commercial, financial and agricultural loans also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail and warehouse space as well as farmland. They also include non-owner-occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company’s residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.

Consumer installment loans include home improvement loans, automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased loans:

(dollars in thousands)	September 30, 2019		December 31, 2018
Commercial, financial and agricultural	$	1,781,237	$	1,316,359
Real estate – construction and development	947,371		671,198
Real estate – commercial and farmland	2,152,528		1,814,529
Real estate – residential	1,866,128		1,403,000
Consumer installment	461,552		455,371
	$	7,208,816	$	5,660,457

Purchased loans are defined as loans that were acquired in bank acquisitions including those that are covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation (the “FDIC”). Purchased loans totaling $5.39 billion and $2.59 billion at September 30, 2019 and December 31, 2018, respectively, are not included in the above schedule.

Purchased loans are shown below according to major loan type as of the end of the periods shown:

(dollars in thousands)	September 30, 2019		December 31, 2018
Commercial, financial and agricultural	$	385,355	$	372,686
Real estate – construction and development	521,324		227,900
Real estate – commercial and farmland	2,057,384		1,337,859
Real estate – residential	1,285,096		623,199
Consumer installment	1,139,177		27,188
	$	5,388,336	$	2,588,832

A rollforward of purchased loans for the nine months ended September 30, 2019 and 2018 is shown below:

(dollars in thousands)	September 30, 2019			September 30, 2018
Balance, January 1	$	2,588,832		$	861,595
Charge-offs	(3,521		)	(1,314		)
Additions due to acquisitions	3,508,410			2,054,440
Accretion	10,503			8,083
Subsequent fair value adjustments recorded to goodwill	(4,854		)	—
Loans sold	(86,773		)	—
Transfers to loans held for sale	(1,554		)	—
Transfers to purchased other real estate owned	(3,908		)	(2,434		)
Payments received, net of principal advances	(618,799		)	(208,910		)
Ending balance	$	5,388,336		$	2,711,460

The following is a summary of changes in the accretable discounts of purchased loans during the nine months ended September 30, 2019 and 2018:

(dollars in thousands)	September 30, 2019			September 30, 2018
Balance, January 1	$	40,496		$	20,192
Additions due to acquisitions	38,116			29,318
Accretion	(10,503		)	(8,083		)
Accretable discounts removed due to charge-offs	—			(16		)
Transfers between non-accretable and accretable discounts, net	(2,052		)	1,569
Ending balance	$	66,057		$	42,980

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of September 30, 2019, purchased loan pools totaled $229.1 million and consisted of whole-loan residential mortgages on properties outside the Company’s markets, with principal balances totaling $228.0 million and $1.1 million of

remaining purchase premium paid at acquisition. As of December 31, 2018, purchased loan pools totaled $262.6 million with principal balances totaling $260.5 million and $2.1 million of remaining purchase premium paid at acquisition.

At September 30, 2019 and December 31, 2018, all loans in purchased loan pools were performing current loans risk-rated grade 3 (Good Credit). At September 30, 2019 and December 31, 2018, purchased loan pools had no loans on nonaccrual status and had no loans classified as troubled debt restructurings.

At September 30, 2019 and December 31, 2018, the Company had allocated $619,000 and $732,000, respectively, of allowance for loan losses for the purchased loan pools.

As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards, to assess each individual loan file.  Additional research was conducted to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios.  Additionally, a sample of site inspections was completed to provide further assurance.  The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.

Nonaccrual and Past-Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income.  Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned 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.  Past-due loans are loans whose principal or interest is past due 30 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased loans:

(dollars in thousands)	September 30, 2019		December 31, 2018
Commercial, financial and agricultural	$	3,103	$	1,412
Real estate – construction and development	1,357		892
Real estate – commercial and farmland	3,588		4,654
Real estate – residential	13,226		10,465
Consumer installment	465		529
	$	21,739	$	17,952

The following table presents an analysis of purchased loans accounted for on a nonaccrual basis:

(dollars in thousands)	September 30, 2019		December 31, 2018
Commercial, financial and agricultural	$	5,370	$	1,199
Real estate – construction and development	5,326		6,119
Real estate – commercial and farmland	18,777		5,534
Real estate – residential	48,559		10,769
Consumer installment	730		486
	$	78,762	$	24,107

The following table presents an analysis of past-due loans, excluding purchased past-due loans as of September 30, 2019 and December 31, 2018: 

(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
September 30, 2019
Commercial, financial and agricultural	$	10,695	$	2,246	$	8,278	$	21,219	$	1,760,018	$	1,781,237	$	5,380
Real estate – construction and development	999		675		900		2,574		944,797		947,371		—
Real estate – commercial and farmland	4,101		326		2,813		7,240		2,145,288		2,152,528		—
Real estate – residential	12,898		3,235		12,139		28,272		1,837,856		1,866,128		—
Consumer installment	2,167		1,215		767		4,149		457,403		461,552		456
Total	$	30,860	$	7,697	$	24,897	$	63,454	$	7,145,362	$	7,208,816	$	5,836
December 31, 2018
Commercial, financial and agricultural	$	6,479	$	5,295	$	4,763	$	16,537	$	1,299,822	$	1,316,359	$	3,808
Real estate – construction and development	1,218		481		725		2,424		668,774		671,198		—
Real estate – commercial and farmland	1,625		530		3,645		5,800		1,808,729		1,814,529		—
Real estate – residential	11,423		4,631		8,923		24,977		1,378,023		1,403,000		—
Consumer installment	2,344		1,167		735		4,246		451,125		455,371		414
Total	$	23,089	$	12,104	$	18,791	$	53,984	$	5,606,473	$	5,660,457	$	4,222

The following table presents an analysis of purchased past-due loans as of September 30, 2019 and December 31, 2018: 

(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
September 30, 2019
Commercial, financial and agricultural	$	758	$	1,435	$	3,720	$	5,913	$	379,442	$	385,355	$	—
Real estate – construction and development	332		—		5,211		5,543		515,781		521,324		414
Real estate – commercial and farmland	2,416		1,480		13,498		17,394		2,039,990		2,057,384		66
Real estate – residential	24,707		7,092		23,453		55,252		1,229,844		1,285,096		—
Consumer installment	2,347		906		203		3,456		1,135,721		1,139,177		9
Total	$	30,560	$	10,913	$	46,085	$	87,558	$	5,300,778	$	5,388,336	$	489
December 31, 2018
Commercial, financial and agricultural	$	421	$	416	$	1,015	$	1,852	$	370,834	$	372,686	$	—
Real estate – construction and development	627		370		5,273		6,270		221,630		227,900		—
Real estate – commercial and farmland	1,935		736		1,698		4,369		1,333,490		1,337,859		—
Real estate – residential	12,531		2,407		7,005		21,943		601,256		623,199		—
Consumer installment	679		237		249		1,165		26,023		27,188		—
Total	$	16,193	$	4,166	$	15,240	$	35,599	$	2,553,233	$	2,588,832	$	—

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000 (including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

The following is a summary of information pertaining to impaired loans, excluding purchased loans: 

	As of and for the Period Ended
(dollars in thousands)	September 30, 2019		December 31, 2018		September 30, 2018
Nonaccrual loans	$	21,739	$	17,952	$	15,986
Troubled debt restructurings not included above	13,430		9,323		10,943
Total impaired loans	$	35,169	$	27,275	$	26,929
Quarter-to-date interest income recognized on impaired loans	$	317	$	202	$	201
Year-to-date interest income recognized on impaired loans	$	782	$	827	$	625
Quarter-to-date foregone interest income on impaired loans	$	223	$	217	$	225
Year-to-date foregone interest income on impaired loans	$	630	$	853	$	636

The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of September 30, 2019, December 31, 2018 and September 30, 2018:

(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three  Month Average Recorded Investment		Nine  Month Average Recorded Investment
September 30, 2019
Commercial, financial and agricultural	$	4,242	$	773	$	2,979	$	3,752	$	1,569	$	3,724	$	2,645
Real estate – construction and development	2,019		505		921		1,426		113		1,350		1,280
Real estate – commercial and farmland	6,991		593		5,783		6,376		488		6,235		6,610
Real estate – residential	23,476		5,234		17,907		23,141		1,557		21,365		19,650
Consumer installment	496		474		—		474		—		451		471
Total	$	37,224	$	7,579	$	27,590	$	35,169	$	3,727	$	33,125	$	30,656

 

(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
December 31, 2018
Commercial, financial and agricultural	$	1,902	$	1,155	$	513	$	1,668	$	4	$	1,736	$	1,637
Real estate – construction and development	1,378		613		424		1,037		3		1,229		984
Real estate – commercial and farmland	8,950		867		6,649		7,516		1,591		7,537		7,879
Real estate – residential	16,885		5,144		11,365		16,509		867		14,719		15,029
Consumer installment	561		545		—		545		—		584		534
Total	$	29,676	$	8,324	$	18,951	$	27,275	$	2,465	$	25,805	$	26,063

(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related  Allowance		Three  Month Average Recorded Investment		Nine  Month Average Recorded Investment
September 30, 2018
Commercial, financial and agricultural	$	2,216	$	966	$	838	$	1,804	$	5	$	1,791	$	1,629
Real estate – construction and development	1,444		720		701		1,421		46		1,110		971
Real estate – commercial and farmland	8,911		536		7,021		7,557		1,799		8,186		7,969
Real estate – residential	15,964		5,298		10,226		15,524		782		15,726		15,308
Consumer installment	658		623		—		623		—		571		531
Total	$	29,193	$	8,143	$	18,786	$	26,929	$	2,632	$	27,384	$	26,408

The following is a summary of information pertaining to purchased impaired loans: 

	As of and for the Period Ended
(dollars in thousands)	September 30, 2019		December 31, 2018		September 30, 2018
Nonaccrual loans	$	78,762	$	24,107	$	27,764
Troubled debt restructurings not included above	18,295		18,740		20,363
Total impaired loans	$	97,057	$	42,847	$	48,127
Quarter-to-date interest income recognized on impaired loans	$	587	$	918	$	309
Year-to-date interest income recognized on impaired loans	$	2,148	$	2,203	$	1,285
Quarter-to-date foregone interest income on impaired loans	$	1,356	$	451	$	506
Year-to-date foregone interest income on impaired loans	$	2,427	$	1,483	$	1,032

The following table presents an analysis of information pertaining to purchased impaired loans as of September 30, 2019, December 31, 2018 and September 30, 2018:

(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related  Allowance		Three  Month Average Recorded Investment		Nine  Month Average Recorded Investment
September 30, 2019
Commercial, financial and agricultural	$	16,132	$	3,445	$	1,956	$	5,401	$	54	$	5,401	$	3,980
Real estate – construction and development	13,256		169		6,035		6,204		262		6,204		6,622
Real estate – commercial and farmland	38,382		14,629		9,977		24,606		555		24,606		18,018
Real estate – residential	63,328		48,469		11,647		60,116		654		60,116		40,808
Consumer installment	3,479		730		—		730		—		730		635
Total	$	134,577	$	67,442	$	29,615	$	97,057	$	1,525	$	97,057	$	70,063

(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related  Allowance		Three Month Average Recorded Investment		Twelve Month Average Recorded Investment
December 31, 2018
Commercial, financial and agricultural	$	5,717	$	473	$	757	$	1,230	$	—	$	1,101	$	836
Real estate – construction and development	13,714		623		6,511		7,134		476		7,240		5,712
Real estate – commercial and farmland	14,766		1,115		10,581		11,696		684		13,514		12,349
Real estate – residential	24,839		8,185		14,116		22,301		773		23,146		21,433
Consumer installment	526		486		—		486		—		487		229
Total	$	59,562	$	10,882	$	31,965	$	42,847	$	1,933	$	45,488	$	40,559

(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Three Month Average Recorded Investment		Nine  Month Average Recorded Investment
September 30, 2018
Commercial, financial and agricultural	$	5,499	$	631	$	341	$	972	$	—	$	670	$	737
Real estate – construction and development	16,066		312		7,033		7,345		255		6,561		5,356
Real estate – commercial and farmland	20,297		3,013		12,319		15,332		872		13,282		12,513
Real estate – residential	27,028		8,393		15,598		23,991		886		22,932		21,217
Consumer installment	537		487		—		487		—		287		165
Total	$	69,427	$	12,836	$	35,291	$	48,127	$	2,013	$	43,732	$	39,988

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:

Grade 1 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 2 – Strong Credit – This grade includes loans that exhibit one or more characteristics better than that of a Good Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 3 – Good Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 4 – Satisfactory Credit – This grade includes loans which exhibit all the characteristics of a Good Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 5 – Fair Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 6 – Other Assets Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Grade 7 – Substandard – This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 8 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 9 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the loan portfolio, excluding purchased loans, by risk grade as of September 30, 2019 and December 31, 2018 (in thousands): 

Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
September 30, 2019
1	$	520,635	$	—	$	211	$	29	$	12,183	$	533,058
2	672,622		17,908		27,429		30,552		—		748,511
3	200,075		110,267		1,150,753		1,710,512		25,137		3,196,744
4	360,834		780,296		843,062		96,029		423,560		2,503,781
5	19,919		28,696		79,753		6,789		22		135,179
6	1,997		7,531		27,562		3,378		103		40,571
7	5,141		2,673		23,758		18,839		545		50,956
8	14		—		—		—		—		14
9	—		—		—		—		2		2
Total	$	1,781,237	$	947,371	$	2,152,528	$	1,866,128	$	461,552	$	7,208,816
December 31, 2018
1	$	530,864	$	40	$	500	$	16	$	10,744	$	542,164
2	452,250		681		37,079		33,043		48		523,101
3	174,811		74,657		888,433		1,246,383		23,844		2,408,128
4	137,038		582,456		814,068		94,143		419,983		2,047,688
5	13,714		6,264		30,364		8,634		78		59,054
6	5,130		4,091		20,959		4,881		57		35,118
7	2,552		3,009		23,126		15,900		617		45,204
8	—		—		—		—		—		—
9	—		—		—		—		—		—
Total	$	1,316,359	$	671,198	$	1,814,529	$	1,403,000	$	455,371	$	5,660,457

The following table presents the purchased loan portfolio by risk grade as of September 30, 2019 and December 31, 2018 (in thousands):       

Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
September 30, 2019
1	$	77,581	$	—	$	—	$	—	$	2,642	$	80,223
2	18,645		—		9,550		63,722		16,190		108,107
3	56,256		25,070		454,344		1,027,427		1,097,603		2,660,700
4	171,329		466,461		1,455,604		129,058		19,787		2,242,239
5	32,569		9,184		60,071		15,372		49		117,245
6	8,878		13,914		43,747		6,999		126		73,664
7	20,097		6,695		34,068		42,518		2,780		106,158
8	—		—		—		—		—		—
9	—		—		—		—		—		—
Total	$	385,355	$	521,324	$	2,057,384	$	1,285,096	$	1,139,177	$	5,388,336
December 31, 2018
1	$	90,205	$	—	$	—	$	—	$	570	$	90,775
2	2,648		—		7,407		74,398		164		84,617
3	20,489		18,022		230,089		385,279		2,410		656,289
4	215,096		195,079		1,034,943		118,082		23,177		1,586,377
5	14,445		2,728		29,468		16,937		35		63,613
6	11,601		1,459		10,063		7,231		94		30,448
7	18,202		10,612		25,889		21,272		738		76,713
8	—		—		—		—		—		—
9	—		—		—		—		—		—
Total	$	372,686	$	227,900	$	1,337,859	$	623,199	$	27,188	$	2,588,832

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment and approved by the Company’s Chief Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first nine months of 2019 and 2018 totaling $168.6 million and $64.0 million, respectively, under such parameters.

As of September 30, 2019 and December 31, 2018, the Company had a balance of $15.1 million and $11.0 million, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded $883,000 and $890,000 in previous charge-offs on such loans at September 30, 2019 and December 31, 2018, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $1.6 million and $820,000 at September 30, 2019 and December 31, 2018, respectively. At September 30, 2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the nine months ended September 30, 2019 and 2018, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of $5.0 million and $2.3 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased loans, which occurred during the nine months ended September 30, 2019 and 2018: 

	September 30, 2019			September 30, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	3	$	550	10	$	302
Real estate – construction and development	—	—		1	3
Real estate – commercial and farmland	2	224		1	303
Real estate – residential	21	4,183		12	1,617
Consumer installment	7	26		6	36
Total	33	$	4,983	30	$	2,261

Troubled debt restructurings, excluding purchased loans, with an outstanding balance of $843,000 and $1.7 million defaulted during the nine months ended September 30, 2019 and 2018, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents for loans, excluding purchased loans, the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ended September 30, 2019 and 2018: 

	September 30, 2019			September 30, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	3	4	$	10
Real estate – construction and development	—	—		—	—
Real estate – commercial and farmland	3	341		2	548
Real estate – residential	4	481		17	1,155
Consumer installment	5	18		6	23
Total	13	$	843	29	$	1,736

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at September 30, 2019 and December 31, 2018: 

September 30, 2019	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	5	$	649	13	$	119
Real estate – construction and development	3	69		1	1
Real estate – commercial and farmland	12	2,788		3	530
Real estate – residential	88	9,915		20	925
Consumer installment	5	9		23	66
Total	113	$	13,430	60	$	1,641

December 31, 2018	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	5	$	256	14	$	138
Real estate – construction and development	5	145		1	2
Real estate – commercial and farmland	12	2,863		3	426
Real estate – residential	71	6,043		20	1,119
Consumer installment	6	16		24	69
Total	99	$	9,323	62	$	1,754

As of September 30, 2019 and December 31, 2018, the Company had a balance of $21.2 million and $22.2 million, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded $1.1 million and $940,000 in previous charge-offs on such loans at September 30, 2019 and December 31, 2018, respectively. At September 30, 2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the nine months ended September 30, 2019 and 2018, the Company modified purchased loans as troubled debt restructurings, with principal balances of $1.7 million and $1.9 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan loss. The following table presents the purchased loans by class modified as troubled debt restructurings, which occurred during the nine months ended September 30, 2019 and 2018: 

	September 30, 2019			September 30, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	—	$	—	1	$	5
Real estate – construction and development	—	—		—	—
Real estate – commercial and farmland	—	—		1	69
Real estate – residential	20	1,674		16	1,791
Consumer installment	4	39		—	—
Total	24	$	1,713	18	$	1,865

Troubled debt restructurings included in purchased loans with an outstanding balance of $1.2 million and $2.4 million defaulted during the nine months ended September 30, 2019 and 2018, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss.

The following table presents purchased loan troubled debt restructurings by class that defaulted (defined as 30 days past due) during the nine months ended September 30, 2019 and 2018:

	September 30, 2019			September 30, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	1	—	$	—
Real estate – construction and development	—	—		—	—
Real estate – commercial and farmland	1	325		1	69
Real estate – residential	17	895		23	2,302
Consumer installment	2	18		—	—
Total	21	$	1,239	24	$	2,371

The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at September 30, 2019 and December 31, 2018. 

September 30, 2019	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	31	3	$	25
Real estate – construction and development	4	878		2	257
Real estate – commercial and farmland	11	5,829		5	1,428
Real estate – residential	113	11,557		18	1,178
Consumer installment	—	—		7	54
Total	129	$	18,295	35	$	2,942

December 31, 2018	Accruing Loans			Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	31	3	$	32
Real estate – construction and development	4	1,015		5	293
Real estate – commercial and farmland	12	6,162		7	1,685
Real estate – residential	115	11,532		24	1,424
Consumer installment	—	—		4	17
Total	132	$	18,740	43	$	3,451

Allowance for Loan Losses

The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past-due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in the Company’s markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events, such as major plant closings.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio. Commercial insurance premium finance loans, overdraft protection loans, and certain residential mortgage loans and consumer loans serviced by outside processors are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is

assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. The Bank’s independent internal loan review department reviews on an annual basis a sample of relationships in excess of $1,000,000, as well as selective sampling of loans below this threshold. Sampling is based on a number of factors unique to the Bank’s portfolio risks, including, but not limited to, lending divisions, industry, risk grades, and new originations. As a result of these loan reviews, certain loans may be identified as having deteriorating credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past-due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the independent internal loan review department.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 9 (Loss per the regulatory guidance), the uncollectible portion is charged off.

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and nine-month period ended September 30, 2019, the year ended December 31, 2018 and the three and nine-month period ended September 30, 2018. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment			Purchased  Loans			Purchased Loan Pools			Total
Three Months Ended September 30, 2019
Balance, June 30, 2019	$	6,302		$	4,269		$	7,269		$	7,451		$	3,388		$	2,443		$	671		$	31,793
Provision for loan losses	1,925			800			1,166			975			1,289			(114		)	(52		)	5,989
Loans charged off	(1,578		)	—			(14		)	(20		)	(1,195		)	(2,442		)	—			(5,249		)
Recoveries of loans previously charged off	845			2			—			49			269			1,832			—			2,997
Balance, September 30, 2019	$	7,494		$	5,071		$	8,421		$	8,455		$	3,751		$	1,719		$	619		$	35,530
Nine Months Ended September 30, 2019
Balance, December 31, 2018	$	4,287		$	3,734		$	8,975		$	5,363		$	3,795		$	1,933		$	732		$	28,819
Provision for loan losses	5,475			1,562			805			2,886			3,495			(45		)	(113		)	14,065
Loans charged off	(4,920		)	(247		)	(1,367		)	(80		)	(4,214		)	(3,296		)	—			(14,124		)
Recoveries of loans previously charged off	2,652			22			8			286			675			3,127			—			6,770
Balance, September 30, 2019	$	7,494		$	5,071		$	8,421		$	8,455		$	3,751		$	1,719		$	619		$	35,530
Period-end allocation:
Loans individually evaluated for impairment (1)	$	2,575		$	112		$	488		$	1,557		$	—		$	1,719		$	—		$	6,451
Loans collectively evaluated for impairment	4,919			4,959			7,933			6,898			3,751			—			619			29,079
Ending balance	$	7,494		$	5,071		$	8,421		$	8,455		$	3,751		$	1,719		$	619		$	35,530
Loans:
Individually evaluated for impairment (1)	$	4,648		$	921		$	5,783		$	17,907		$	—		$	31,612		$	—		$	60,871
Collectively evaluated for impairment	1,776,589			946,450			2,146,745			1,848,221			461,552			5,173,717			229,132			12,582,406
Acquired with deteriorated credit quality	—			—			—			—			—			183,007			—			183,007
Ending balance	$	1,781,237		$	947,371		$	2,152,528		$	1,866,128		$	461,552		$	5,388,336		$	229,132		$	12,826,284

(1) At September 30, 2019, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.

(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment			Purchased  Loans			Purchased Loan Pools			Total
Twelve Months Ended December 31, 2018
Balance, December 31, 2017	$	3,631		$	3,629		$	7,501		$	4,786		$	1,916		$	3,253		$	1,075		$	25,791
Provision for loan losses	10,690			277			1,636			1,002			5,569			(2,164		)	(343		)	16,667
Loans charged off	(13,803		)	(292		)	(338		)	(771		)	(4,189		)	(1,738		)	—			(21,131		)
Recoveries of loans previously charged off	3,769			120			176			346			499			2,582			—			7,492
Balance, December 31, 2018	$	4,287		$	3,734		$	8,975		$	5,363		$	3,795		$	1,933		$	732		$	28,819
Period-end allocation:
Loans individually evaluated for impairment (1)	$	570		$	3		$	1,591		$	867		$	—		$	1,933		$	—		$	4,964
Loans collectively evaluated for impairment	3,717			3,731			7,384			4,496			3,795			—			732			23,855
Ending balance	$	4,287		$	3,734		$	8,975		$	5,363		$	3,795		$	1,933		$	732		$	28,819
Loans:
Individually evaluated for impairment (1)	$	3,211		$	424		$	6,649		$	11,364		$	—		$	32,244		$	—		$	53,892
Collectively evaluated for impairment	1,313,148			670,774			1,807,880			1,391,636			455,371			2,468,996			262,625			8,370,430
Acquired with deteriorated credit quality	—			—			—			—			—			87,592			—			87,592
Ending balance	$	1,316,359		$	671,198		$	1,814,529		$	1,403,000		$	455,371		$	2,588,832		$	262,625		$	8,511,914

(1) At December 31, 2018, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.

(dollars in thousands)	Commercial, Financial and Agricultural			Real Estate – Construction and Development			Real Estate – Commercial and Farmland			Real Estate – Residential			Consumer Installment			Purchased  Loans			Purchased Loan Pools			Total
Three Months Ended September 30, 2018
Balance, June 30, 2018	$	8,400		$	3,789		$	8,215		$	5,136		$	2,877		$	2,339		$	776		$	31,532
Provision for loan losses	1,021			137			809			209			1,039			(1,148		)	28			2,095
Loans charged off	(6,121		)	(265		)	(27		)	(293		)	(923		)	(483		)	—			(8,112		)
Recoveries of loans previously charged off	939			1			134			44			178			1,305			—			2,601
Balance, September 30, 2018	$	4,239		$	3,662		$	9,131		$	5,096		$	3,171		$	2,013		$	804		$	28,116
Nine Months Ended September 30, 2018
Balance, December 31, 2017	$	3,631		$	3,629		$	7,501		$	4,786		$	1,916		$	3,253		$	1,075		$	25,791
Provision for loan losses	9,080			201			1,630			750			3,617			(2,001		)	(271		)	13,006
Loans charged off	(11,314		)	(285		)	(169		)	(695		)	(2,724		)	(1,514		)	—			(16,701		)
Recoveries of loans previously charged off	2,842			117			169			255			362			2,275			—			6,020
Balance, September 30, 2018	$	4,239		$	3,662		$	9,131		$	5,096		$	3,171		$	2,013		$	804		$	28,116
Period-end allocation:
Loans individually evaluated for impairment (1)	$	821		$	46		$	1,800		$	782		$	—		$	2,013		$	2		$	5,464
Loans collectively evaluated for impairment	3,418			3,616			7,331			4,314			3,171			—			802			22,652
Ending balance	$	4,239		$	3,662		$	9,131		$	5,096		$	3,171		$	2,013		$	804		$	28,116
Loans:
Individually evaluated for impairment (1)	$	2,362		$	701		$	7,021		$	10,226		$	—		$	36,156		$	4,697		$	61,163
Collectively evaluated for impairment	1,419,790			641,129			1,797,244			1,264,975			399,858			2,573,182			270,055			8,366,233
Acquired with deteriorated credit quality	—			—			—			—			—			102,122			—			102,122
Ending balance	$	1,422,152		$	641,830		$	1,804,265		$	1,275,201		$	399,858		$	2,711,460		$	274,752		$	8,529,518

(1) At September 30, 2018, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.