LOANS

6 Months Ended

Jun. 30, 2017

Receivables [Abstract]

LOANS AND ALLOWANCE FOR LOAN LOSSES

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 an unrelated third party consumer installment home improvement loans made to borrowers throughout the United States. As of June 30, 2017 and December 31, 2016, the net carrying value of these consumer installment home improvement loans was approximately $112.1 million and $60.8 million, respectively. 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 June 30, 2017 and December 31, 2016, the net carrying value of commercial insurance premium loans was approximately $476.6 million and $353.9 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, farmland and warehouse space. 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 and other 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:

	June 30,		December 31,
(dollars in thousands)	2017		2016
Commercial, financial and agricultural	$	1,218,633	$	967,138
Real estate – construction and development		486,858		363,045
Real estate – commercial and farmland		1,519,002		1,406,219
Real estate – residential		857,069		781,018
Consumer installment		147,505		96,915
Other		1,161		12,486
	$	4,230,228	$	3,626,821

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 $950.5 million and $1.07 billion at June 30, 2017 and December 31, 2016, 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:

	June 30,		December 31,
(dollars in thousands)	2017		2016
Commercial, financial and agricultural	$	87,612	$	96,537
Real estate – construction and development		73,567		81,368
Real estate – commercial and farmland		510,312		576,355
Real estate – residential		275,504		310,277
Consumer installment		3,504		4,654
	$	950,499	$	1,069,191

A rollforward of purchased loans for the six months ended June 30, 2017 and 2016 is shown below:

	June 30,		June 30,
(dollars in thousands)	2017		2016
Balance, January 1	$	1,069,191	$	909,083
Charge-offs, net of recoveries		(1,860)		(1,181)
Additions due to acquisitions		-		401,085
Accretion		6,165		8,844
Transfers to purchased other real estate owned		(3,281)		(3,420)
Payments received		(119,716)		(120,866)
Other		-		90
Ending balance	$	950,499	$	1,193,635

The following is a summary of changes in the accretable discounts of purchased loans during the six months ended June 30, 2017 and 2016:

	June 30,		June 30,
(dollars in thousands)	2017		2016
Balance, January 1	$	30,624	$	33,848
Additions due to acquisitions		-		9,991
Accretion		(6,165)		(8,844)
Accretable discounts removed due to charge-offs		(13)		(11)
Transfers between non-accretable and accretable discounts, net		807		1,461
Ending balance	$	25,253	$	36,445

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of June 30, 2017, purchased loan pools totaled $490.1 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $483.2 million and $6.9 million of remaining purchase premium paid at acquisition. As of December 31, 2016, purchased loan pools totaled $568.3 million with principal balances totaling $559.4 million and $8.9 million of remaining purchase premium paid at acquisition. At June 30, 2017 and December 31, 2016, one loan in the purchased loan pools with a principal balance of $918,000 and $925,000, respectively, was classified as a troubled debt restructuring and risk-rated grade 40, while all other loans included in the purchased loan pools were performing current loans risk-rated grade 20. During the second quarter of 2017, this troubled debt restructuring defaulted on its restructured terms and was placed on nonaccrual status. At June 30, 2017 and December 31, 2016, the Company had allocated $1.6 million and $1.8 million, 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:

	June 30,		December 31,
(dollars in thousands)	2017		2016
Commercial, financial and agricultural	$	2,463	$	1,814
Real estate – construction and development		770		547
Real estate – commercial and farmland		6,004		8,757
Real estate – residential		7,342		6,401
Consumer installment		504		595
	$	17,083	$	18,114

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

	June 30,		December 31,
(dollars in thousands)	2017		2016
Commercial, financial and agricultural	$	169	$	692
Real estate – construction and development		2,463		2,611
Real estate – commercial and farmland		6,624		10,174
Real estate – residential		8,074		9,476
Consumer installment		27		13
	$	17,357	$	22,966

The following table presents an analysis of past-due loans, excluding purchased past-due loans as of June 30, 2017 and December 31, 2016:

													Loans 90
													Days or
	Loans		Loans		Loans 90								More Past
	30-59		60-89		or More		Total						Due and
	Days Past		Days		Days Past		Loans		Current		Total		Still
(dollars in thousands)	Due		Past Due		Due		Past Due		Loans		Loans		Accruing
June 30, 2017
Commercial, financial & agricultural	$	6,343	$	2,298	$	3,919	$	12,560	$	1,206,073	$	1,218,633	$	1,784
Real estate – construction & development		205		12		751		968		485,890		486,858		-
Real estate – commercial & farmland		1,311		366		5,602		7,279		1,511,723		1,519,002		-
Real estate – residential		2,833		1,174		5,432		9,439		847,630		857,069		-
Consumer installment loans		575		188		294		1,057		146,448		147,505		-
Other		-		-		-		-		1,161		1,161		-
Total	$	11,267	$	4,038	$	15,998	$	31,303	$	4,198,925	$	4,230,228	$	1,784
December 31, 2016
Commercial, financial & agricultural	$	565	$	82	$	1,293	$	1,940	$	965,198	$	967,138	$	-
Real estate – construction & development		908		446		439		1,793		361,252		363,045		-
Real estate – commercial & farmland		6,329		1,711		6,945		14,985		1,391,234		1,406,219		-
Real estate – residential		6,354		1,282		5,302		12,938		768,080		781,018		-
Consumer installment loans		624		263		350		1,237		95,678		96,915		-
Other		-		-		-		-		12,486		12,486		-
Total	$	14,780	$	3,784	$	14,329	$	32,893	$	3,593,928	$	3,626,821	$	-

The following table presents an analysis of purchased past-due loans as of June 30, 2017 and December 31, 2016:

													Loans 90
													Days or
	Loans		Loans		Loans 90								More Past
	30-59		60-89		or More		Total						Due and
	Days Past		Days		Days Past		Loans		Current		Total		Still
(dollars in thousands)	Due		Past Due		Due		Past Due		Loans		Loans		Accruing
June 30, 2017
Commercial, financial & agricultural	$	171	$	-	$	152	$	323	$	87,289	$	87,612	$	-
Real estate – construction & development		322		81		1,830		2,233		71,334		73,567		-
Real estate – commercial & farmland		1,084		46		2,260		3,390		506,922		510,312		-
Real estate – residential		985		1,353		5,256		7,594		267,910		275,504		147
Consumer installment loans		28		-		16		44		3,460		3,504		-
Total	$	2,590	$	1,480	$	9,514	$	13,584	$	936,915	$	950,499	$	147
December 31, 2016
Commercial, financial & agricultural	$	113	$	18	$	593	$	724	$	95,813	$	96,537	$	-
Real estate – construction & development		161		11		2,518		2,690		78,678		81,368		-
Real estate – commercial & farmland		2,034		326		7,152		9,512		566,843		576,355		-
Real estate – residential		4,566		698		6,835		12,099		298,178		310,277		-
Consumer installment loans		22		-		13		35		4,619		4,654		-
Total	$	6,896	$	1,053	$	17,111	$	25,060	$	1,044,131	$	1,069,191	$	-

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
	June 30,		December 31,		June 30,
(dollars in thousands)	2017		2016		2016
Nonaccrual loans	$	17,083	$	18,114	$	16,003
Troubled debt restructurings not included above		12,169		14,209		14,795
Total impaired loans	$	29,252	$	32,323	$	30,798
Quarter-to-date interest income recognized on impaired loans	$	320	$	225	$	238
Year-to-date interest income recognized on impaired loans	$	560	$	1,033	$	556
Quarter-to-date foregone interest income on impaired loans	$	247	$	267	$	230
Year-to-date foregone interest income on impaired loans	$	521	$	977	$	471

The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of June 30, 2017, December 31, 2016 and June 30, 2016:

											Three		Six
	Unpaid		Recorded		Recorded						Month		Month
	Contractual		Investment		Investment		Total				Average		Average
	Principal		With No		With		Recorded		Related		Recorded		Recorded
(dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Investment
June 30, 2017
Commercial, financial & agricultural	$	4,166	$	596	$	1,907	$	2,503	$	704	$	3,113	$	2,695
Real estate – construction & development		1,733		119		1,080		1,199		179		1,123		1,160
Real estate – commercial & farmland		11,885		5,940		4,923		10,863		1,436		11,156		11,730
Real estate – residential		13,569		2,154		12,017		14,171		1,994		15,946		16,186
Consumer installment loans		583		-		516		516		5		553		572
Total	$	31,936	$	8,809	$	20,443	$	29,252	$	4,318	$	31,891	$	32,343

											Three		Twelve
	Unpaid		Recorded		Recorded						Month		Month
	Contractual		Investment		Investment		Total				Average		Average
	Principal		With No		With		Recorded		Related		Recorded		Recorded
(dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Investment
December 31, 2016
Commercial, financial & agricultural	$	3,068	$	204	$	1,656	$	1,860	$	134	$	1,613	$	1,684
Real estate – construction & development		2,047		-		1,233		1,233		273		1,590		2,018
Real estate – commercial & farmland		13,906		6,811		6,065		12,876		1,503		12,948		12,845
Real estate – residential		15,482		2,238		13,503		15,741		3,080		15,525		14,453
Consumer installment loans		671		-		613		613		5		576		506
Total	$	35,174	$	9,253	$	23,070	$	32,323	$	4,995	$	32,252	$	31,506

											Three		Six
	Unpaid		Recorded		Recorded						Month		Month
	Contractual		Investment		Investment		Total				Average		Average
	Principal		With No		With		Recorded		Related		Recorded		Recorded
(dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Investment
June 30, 2016
Commercial, financial & agricultural	$	3,786	$	652	$	1,453	$	2,105	$	150	$	1,825	$	1,731
Real estate – construction & development		3,141		230		1,826		2,056		697		2,154		2,304
Real estate – commercial & farmland		13,592		5,312		7,221		12,533		1,000		12,772		12,777
Real estate – residential		14,460		1,329		12,331		13,660		2,369		13,249		13,450
Consumer installment loans		531		-		444		444		8		441		458
Total	$	35,510	$	7,523	$	23,275	$	30,798	$	4,224	$	30,441	$	30,720

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

	As of and for the Period Ended
	June 30,		December 31,		June 30,
(dollars in thousands)	2017		2016		2016
Nonaccrual loans	$	17,357	$	22,966	$	26,736
Troubled debt restructurings not included above		21,020		23,543		20,642
Total impaired loans	$	38,377	$	46,509	$	47,378
Quarter-to-date interest income recognized on impaired loans	$	374	$	377	$	343
Year-to-date interest income recognized on impaired loans	$	753	$	2,755	$	885
Quarter-to-date foregone interest income on impaired loans	$	265	$	354	$	412
Year-to-date foregone interest income on impaired loans	$	601	$	1,637	$	938

The following table presents an analysis of information pertaining to purchased impaired loans as of June 30, 2017, December 31, 2016 and June 30, 2016:

											Three		Six
	Unpaid		Recorded		Recorded						Month		Month
	Contractual		Investment		Investment		Total				Average		Average
	Principal		With No		With		Recorded		Related		Recorded		Recorded
(dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Investment
June 30, 2017
Commercial, financial & agricultural	$	1,679	$	163	$	6	$	169	$	-	$	273	$	412
Real estate – construction & development		8,296		524		2,967		3,491		257		3,491		3,650
Real estate – commercial & farmland		16,987		2,418		11,616		14,034		771		16,167		16,989
Real estate – residential		24,219		7,647		13,009		20,656		763		21,262		21,904
Consumer installment loans		36		27		-		27		-		24		24
Total	$	51,217	$	10,779	$	27,598	$	38,377	$	1,791	$	41,217	$	42,979

											Three		Twelve
	Unpaid		Recorded		Recorded						Month		Month
	Contractual		Investment		Investment		Total				Average		Average
	Principal		With No		With		Recorded		Related		Recorded		Recorded
(dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Investment
December 31, 2016
Commercial, financial & agricultural	$	5,031	$	370	$	322	$	692	$	-	$	783	$	2,206
Real estate – construction & development		24,566		493		3,477		3,970		153		3,888		4,279
Real estate – commercial & farmland		36,174		3,598		15,036		18,634		385		17,806		19,872
Real estate – residential		27,022		7,883		15,306		23,189		1,088		23,201		23,163
Consumer installment loans		37		24		-		24		-		51		96
Total	$	92,830	$	12,368	$	34,141	$	46,509	$	1,626	$	45,729	$	49,616

											Three		Six
	Unpaid		Recorded		Recorded						Month		Month
	Contractual		Investment		Investment		Total				Average		Average
	Principal		With No		With		Recorded		Related		Recorded		Recorded
(dollars in thousands)	Balance		Allowance		Allowance		Investment		Allowance		Investment		Investment
June 30, 2016
Commercial, financial & agricultural	$	2,976	$	802	$	-	$	802	$	-	$	2,132	$	2,710
Real estate – construction & development		10,082		1,538		2,550		4,088		223		4,273		4,164
Real estate – commercial & farmland		27,234		4,202		15,211		19,413		690		21,581		20,433
Real estate – residential		26,781		12,099		10,894		22,993		474		22,604		22,786
Consumer installment loans		103		82		-		82		-		109		114
Total	$	67,176	$	18,723	$	28,655	$	47,378	$	1,387	$	50,699	$	50,207

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

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized 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 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory 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 30 – Other Asset 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 40 – 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 50 – 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 60 – 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 June 30, 2017 and December 31, 2016 (in thousands):

Risk Grade	Commercial, Financial & Agricultural		Real Estate - Construction & Development		Real Estate - Commercial & Farmland		Real Estate - Residential		Consumer Installment Loans		Other		Total
June 30, 2017
10	$	475,310	$	-	$	6,384	$	51	$	8,769	$	-	$	490,514
15		502,635		1,306		81,494		45,429		277		-		631,141
20		108,940		47,672		996,883		696,382		24,270		1,161		1,875,308
23		349		6,072		3,055		5,906		4		-		15,386
25		120,987		424,915		399,354		89,100		113,430		-		1,147,786
30		5,720		5,217		16,817		4,998		119		-		32,871
40		4,685		1,676		15,015		15,104		636		-		37,116
50		7		-		-		99		-		-		106
60		-		-		-		-		-		-		-
Total	$	1,218,633	$	486,858	$	1,519,002	$	857,069	$	147,505	$	1,161	$	4,230,228
December 31, 2016
10	$	397,093	$	-	$	8,814	$	125	$	8,532	$	-	$	414,564
15		376,323		5,390		102,893		54,136		405		-		539,147
20		97,057		36,307		889,539		609,583		25,026		12,486		1,669,998
23		366		6,803		8,533		7,470		14		-		23,186
25		92,066		307,903		357,151		88,370		62,098		-		907,588
30		144		719		22,986		5,197		126		-		29,172
40		4,089		5,923		16,303		16,038		714		-		43,067
50		-		-		-		99		-		-		99
60		-		-		-		-		-		-		-
Total	$	967,138	$	363,045	$	1,406,219	$	781,018	$	96,915	$	12,486	$	3,626,821

The following table presents the purchased loan portfolio by risk grade as of June 30, 2017 and December 31, 2016 (in thousands):

Risk Grade	Commercial, Financial & Agricultural		Real Estate - Construction & Development		Real Estate - Commercial & Farmland		Real Estate - Residential		Consumer Installment Loans		Other		Total
June 30, 2017
10	$	5,202	$	-	$	-	$	-	$	757	$	-	$	5,959
15		4,890		-		6,210		27,943		348		-		39,391
20		12,311		12,289		190,506		111,033		1,310		-		327,449
23		22		2,553		8,139		11,344		-		-		22,058
25		51,611		46,179		261,911		99,248		954		-		459,903
30		11,359		9,215		14,545		6,693		57		-		41,869
40		2,217		3,331		29,001		19,243		78		-		53,870
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	87,612	$	73,567	$	510,312	$	275,504	$	3,504	$	-	$	950,499
December 31, 2016
10	$	5,722	$	-	$	-	$	-	$	814	$	-	$	6,536
15		1,266		-		7,619		31,331		570		-		40,786
20		16,204		10,686		194,168		111,712		1,583		-		334,353
23		22		3,643		9,019		14,791		-		-		27,475
25		67,123		56,006		323,242		121,379		1,276		-		569,026
30		5,072		7,271		15,039		7,605		45		-		35,032
40		1,128		3,762		27,268		23,459		366		-		55,983
50		-		-		-		-		-		-		-
60		-		-		-		-		-		-		-
Total	$	96,537	$	81,368	$	576,355	$	310,277	$	4,654	$	-	$	1,069,191

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 six months of 2017 and 2016 totaling $16.2 million and $36.8 million, respectively, under such parameters.

As of June 30, 2017 and December 31, 2016, the Company had a balance of $14.6 million and $18.2 million, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded $2.0 million and $1.2 million in previous charge-offs on such loans at June 30, 2017 and December 31, 2016, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $1.7 million and $3.1 million at June 30, 2017 and December 31, 2016, respectively. At June 30, 2017, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the six months ending June 30, 2017 and 2016, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of $1.2 million and $2.5 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 six months ending June 30, 2017 and 2016:

	June 30, 2017				June 30, 2016
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		-	$	-		2	$	28
Real estate – construction & development		-		-		1		6
Real estate – commercial & farmland		4		1,062		4		1,666
Real estate – residential		1		77		6		739
Consumer installment		6		31		6		26
Total		11	$	1,170		19	$	2,465

Troubled debt restructurings, excluding purchased loans, with an outstanding balance of $992,000 and $494,000 defaulted during the six months ended June 30, 2017 and 2016, 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 six months ending June 30, 2017 and 2016:

	June 30, 2017				June 30, 2016
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		2	$	49		2	$	7
Real estate – construction & development		-		-		-		-
Real estate – commercial & farmland		4		362		2		191
Real estate – residential		9		554		6		292
Consumer installment		7		27		1		4
Total		22	$	992		11	$	494

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and nonaccrual at June 30, 2017 and December 31, 2016:

June 30, 2017	Accruing Loans				Non-Accruing Loans
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		3	$	40		15	$	136
Real estate – construction & development		7		429		2		34
Real estate – commercial & farmland		16		4,859		4		192
Real estate – residential		74		6,829		17		1,975
Consumer installment		7		12		34		133
Total		107	$	12,169		72	$	2,470

December 31, 2016	Accruing Loans				Non-Accruing Loans
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		4	$	47		15	$	114
Real estate – construction & development		8		686		2		34
Real estate – commercial & farmland		16		4,119		5		2,970
Real estate – residential		82		9,340		15		739
Consumer installment		7		17		32		130
Total		117	$	14,209		69	$	3,987

As of June 30, 2017 and December 31, 2016, the Company had a balance of $27.3 million and $28.1 million, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded $1.5 million in previous charge-offs on such loans at both June 30, 2017 and December 31, 2016. At June 30, 2017, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the six months ending June 30, 2017 and 2016, the Company modified purchased loans as troubled debt restructurings, with principal balances of $1.9 million and $1.2 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 six months ending June 30, 2017 and 2016:

	June 30, 2017				June 30, 2016
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		1	$	6		1	$	76
Real estate – construction & development		-		-		-		-
Real estate – commercial & farmland		4		1,323		2		492
Real estate – residential		4		578		3		662
Consumer installment		-		-		-		-
Total		9	$	1,907		6	$	1,230

Troubled debt restructurings included in purchased loans with an outstanding balance of $373,000 and $1.4 million defaulted during the six months ended June 30, 2017 and 2016, 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 six months ending June 30, 2017 and 2016:

	June 30, 2017				June 30, 2016
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		1	$	6		2	$	76
Real estate – construction & development		-		-		2		402
Real estate – commercial & farmland		1		226		-		-
Real estate – residential		4		138		6		919
Consumer installment		1		3		-		-
Total		7	$	373		10	$	1,397

The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and nonaccrual at June 30, 2017 and December 31, 2016.

June 30, 2017	Accruing Loans				Non-Accruing Loans
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		-	$	-		4	$	21
Real estate – construction & development		3		1,028		6		356
Real estate – commercial & farmland		17		7,410		11		3,935
Real estate – residential		120		12,582		32		1,965
Consumer installment		-		-		2		7
Total		140	$	21,020		55	$	6,284

December 31, 2016	Accruing Loans				Non-Accruing Loans
			Balance				Balance
Loan Class	#		(in thousands)		#		(in thousands)
Commercial, financial & agricultural		1	$	1		4	$	91
Real estate – construction & development		6		1,358		3		30
Real estate – commercial & farmland		20		8,460		5		2,402
Real estate – residential		123		13,713		33		2,077
Consumer installment		3		11		1		-
Total		153	$	23,543		46	$	4,600

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. Mortgage warehouse lines of credit, overdraft protection loans, commercial insurance premium finance loans, and certain consumer and mortgage 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 $500,000. 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 60 (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 six-month periods ended June 30, 2017, the year ended December 31, 2016 and the three and six-month periods ended June 30, 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

									Consumer
	Commercial,		Real Estate –		Real Estate –				Installment				Purchased
	Financial &		Construction &		Commercial &		Real Estate –		Loans and		Purchased		Loan
(dollars in thousands)	Agricultural		Development		Farmland		Residential		Other		Loans		Pools		Total
Three months ended June 30, 2017:
Balance, March 31, 2017	$	2,798	$	3,597	$	7,879	$	5,840	$	854	$	2,196	$	2,086	$	25,250
Provision for loan losses		984		102		255		655		695		(23)		(463)		2,205
Loans charged off		(701)		(41)		(386)		(963)		(438)		(755)		-		(3,284)
Recoveries of loans previously charged off		221		98		121		73		44		373		-		930
Balance, June 30, 2017	$	3,302	$	3,756	$	7,869	$	5,605	$	1,155	$	1,791	$	1,623	$	25,101
Six months ended June 30, 2017:
Balance, December 31, 2016	$	2,192	$	2,990	$	7,662	$	6,786	$	827	$	1,626	$	1,837	$	23,920
Provision for loan losses		1,625		742		472		(136)		869		683		(214)		4,041
Loans charged off		(805)		(94)		(395)		(1,179)		(602)		(1,311)		-		(4,386)
Recoveries of loans previously charged off		290		118		130		134		61		793		-		1,526
Balance, June 30, 2017	$	3,302	$	3,756	$	7,869	$	5,605	$	1,155	$	1,791	$	1,623	$	25,101
Period-end allocation:
Loans individually evaluated for impairment (1)	$	691	$	174	$	1,437	$	1,748	$	-	$	1,791	$	180	$	6,021
Loans collectively evaluated for impairment		2,611		3,582		6,432		3,857		1,155		-		1,443		19,080
Ending balance	$	3,302	$	3,756	$	7,869	$	5,605	$	1,155	$	1,791	$	1,623	$	25,101
Loans:
Individually evaluated for impairment (1)	$	2,418	$	636	$	10,814	$	8,282	$	-	$	27,598	$	918	$	50,666
Collectively evaluated for impairment		1,216,215		486,222		1,508,188		848,787		148,666		794,706		489,196		5,491,980
Acquired with deteriorated credit quality		-		-		-		-		-		128,195		-		128,195
Ending balance	$	1,218,633	$	486,858	$	1,519,002	$	857,069	$	148,666	$	950,499	$	490,114	$	5,670,841

(1) At June 30, 2017, 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.

									Consumer
	Commercial,		Real Estate –		Real Estate –				Installment				Purchased
	Financial &		Construction &		Commercial &		Real Estate -		Loans and		Purchased		Loan
(dollars in thousands)	Agricultural		Development		Farmland		Residential		Other		Loans		Pools		Total
Twelve months ended December 31, 2016:
Balance, January 1, 2016	$	1,144	$	5,009	$	7,994	$	4,760	$	1,574	$	-	$	581	$	21,062
Provision for loan losses		2,647		(1,921)		107		2,757		(523)		(232)		1,256		4,091
Loans charged off		(1,999)		(588)		(708)		(1,122)		(351)		(1,559)		-		(6,327)
Recoveries of loans previously charged off		400		490		269		391		127		3,417		-		5,094
Balance, December 31, 2016	$	2,192	$	2,990	$	7,662	$	6,786	$	827	$	1,626	$	1,837	$	23,920
Period-end allocation:
Loans individually evaluated for impairment (1)	$	120	$	266	$	1,502	$	2,893	$	-	$	1,626	$	-	$	6,407
Loans collectively evaluated for impairment		2,072		2,724		6,160		3,893		827		-		1,837		17,513
Ending balance	$	2,192	$	2,990	$	7,662	$	6,786	$	827	$	1,626	$	1,837	$	23,920
Loans:
Individually evaluated for impairment (1)	$	501	$	659	$	12,423	$	12,697	$	-	$	34,141	$	-	$	60,421
Collectively evaluated for impairment		966,637		362,386		1,393,796		768,321		109,401		886,516		568,314		5,055,371
Acquired with deteriorated credit quality		-		-		-		-		-		148,534		-		148,534
Ending balance	$	967,138	$	363,045	$	1,406,219	$	781,018	$	109,401	$	1,069,191	$	568,314	$	5,264,326

(1) At December 31, 2016, 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.

									Consumer
	Commercial,		Real Estate –		Real Estate –				Installment				Purchased
	Financial &		Construction &		Commercial &		Real Estate -		Loans and		Purchased		Loan
(dollars in thousands)	Agricultural		Development		Farmland		Residential		Other		Loans		Pools		Total
Three months ended June 30, 2016:
Balance, March 31, 2016	$	1,599	$	3,925	$	7,099	$	4,631	$	1,939	$	983	$	1,306	$	21,482
Provision for loan losses		522		(438)		664		(259)		264		243		(107)		889
Loans charged off		(541)		(109)		(361)		(123)		(59)		(183)		-		(1,376)
Recoveries of loans previously charged off		87		221		57		14		16		344		-		739
Balance, June 30, 2016	$	1,667	$	3,599	$	7,459	$	4,263	$	2,160	$	1,387	$	1,199	$	21,734
Six months ended June 30, 2016:
Balance, December 31, 2015	$	1,144	$	5,009	$	7,994	$	4,760	$	1,574	$	-	$	581	$	21,062
Provision for loan losses		1,310		(1,489)		(5)		(234)		663		707		618		1,570
Loans charged off		(947)		(264)		(708)		(591)		(118)		(562)		-		(3,190)
Recoveries of loans previously charged off		160		343		178		328		41		1,242		-		2,292
Balance, June 30, 2016	$	1,667	$	3,599	$	7,459	$	4,263	$	2,160	$	1,387	$	1,199	$	21,734
Period-end allocation:
Loans individually evaluated for impairment (1)	$	137	$	690	$	997	$	2,339	$	-	$	1,387	$	-	$	5,550
Loans collectively evaluated for impairment		1,530		2,909		6,462		1,924		2,160		-		1,199		16,184
Ending balance	$	1,667	$	3,599	$	7,459	$	4,263	$	2,160	$	1,387	$	1,199	$	21,734
Loans:
Individually evaluated for impairment (1)	$	819	$	1,465	$	11,870	$	10,345	$	-	$	41,751	$	-	$	66,250
Collectively evaluated for impairment		563,524		273,252		1,236,710		669,888		51,198		978,135		610,425		4,383,132
Acquired with deteriorated credit quality		-		-		-		-		-		173,749		-		173,749
Ending balance	$	564,343	$	274,717	$	1,248,580	$	680,233	$	51,198	$	1,193,635	$	610,425	$	4,623,131

(1) At June 30, 2016, 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.