NOTE 4 – LOANS

The Company 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. Ameris 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.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company 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, construction of one-to-four family 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.

Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and both 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:


(Dollars in Thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Commercial, financial and agricultural	$	208,424	$	174,217	$	174,903
Real estate – construction and development		134,607		114,199		124,556
Real estate – commercial and farmland		788,654		732,322		675,404
Real estate – residential		357,685		346,480		332,124
Consumer installment		36,923		40,178		41,431
Other		29,534		43,239		17,071

	$	1,555,827	$	1,450,635	$	1,365,489

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $443.5 million, $507.7 million and $601.7 million at June 30, 2013, December 31, 2012 and June 30, 2012, respectively, are not included in the above schedule.

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


(Dollars in Thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Commercial, financial and agricultural	$	27,371	$	32,606	$	41,372
Real estate – construction and development		52,972		70,184		83,991
Real estate – commercial and farmland		255,102		278,506		322,393
Real estate – residential		107,107		125,056		150,683
Consumer installment		965		1,360		3,298

	$	443,517	$	507,712	$	601,737

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 to interest income. Interest on loans that are classified as non-accrual is recognized when received. Past due loans are loans whose principal or interest is past due 90 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 non-covered loans accounted for on a nonaccrual basis:


(Dollars in Thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Commercial, financial and agricultural	$	4,326	$	4,138	$	4,968
Real estate – construction and development		5,448		9,281		8,979
Real estate – commercial and farmland		8,963		11,962		13,728
Real estate – residential		12,423		12,595		15,542
Consumer installment		651		909		1,204

	$	31,811	$	38,885	$	44,421

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


(Dollars in Thousands)	June 30, 2013		December 31, 2012		June 30, 2012
Commercial, financial and agricultural	$	8,729	$	10,765	$	13,406
Real estate – construction and development		17,039		20,027		28,225
Real estate – commercial and farmland		47,427		55,946		71,271
Real estate – residential		15,459		28,672		37,669
Consumer installment		285		302		654

	$	88,939	$	115,712	$	151,225

The following table presents an aging analysis of non-covered loans as of June 30, 2013, December 31, 2012 and June 30, 2012.


	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
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	1,449	$	502	$	4,013	$	5,964	$	202,460	$	208,424	$	—
Real estate – construction & development		1,638		104		5,418		7,160		127,447		134,607		—
Real estate – commercial & farmland		5,392		1,580		5,333		12,305		776,349		788,654		—
Real estate – residential		4,735		5,256		11,745		21,736		335,949		357,685		—
Consumer installment loans		432		175		548		1,155		35,768		36,923		—
Other		—		—		—		—		29,534		29,534		—

Total	$	13,646	$	7,617	$	27,057	$	48,320	$	1,507,507	$	1,555,827	$	—


	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
	(Dollars in Thousands)
As of December 30, 2012:
Commercial, financial & agricultural	$	258	$	312	$	3,969	$	4,539	$	169,678	$	174,217	$	—
Real estate – construction & development		347		332		8,969		9,648		104,551		114,199		—
Real estate – commercial & farmland		2,867		2,296		9,544		14,707		717,615		732,322		—
Real estate – residential		7,651		2,766		10,990		21,407		325,073		346,480		—
Consumer installment loans		702		391		815		1,908		38,270		40,178		—
Other		—		—		—		—		43,239		43,239		—

Total	$	11,825	$	6,097	$	34,287	$	52,209	$	1,398,426	$	1,450,635	$	—


	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
	(Dollars in Thousands)
As of June 30, 2012:
Commercial, financial & agricultural	$	531	$	701	$	4,371	$	5,603	$	169,300	$	174,903	$	—
Real estate – construction & development		1,986		2,119		7,855		11,960		112,596		124,556		—
Real estate – commercial & farmland		5,282		6,930		8,597		20,809		654,595		675,404		—
Real estate – residential		5,665		3,885		14,782		24,332		307,792		332,124		—
Consumer installment loans		545		221		1,117		1,883		39,548		41,431		1
Other		—		—		—		—		17,071		17,071		—

Total	$	14,009	$	13,856	$	36,722	$	64,587	$	1,300,902	$	1,365,489	$	1

The following table presents an aging analysis of covered loans as of June 30, 2013, December 31, 2012 and June 30, 2012.


	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
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	529	$	441	$	7,333	$	8,303	$	19,068	$	27,371	$	63
Real estate – construction & development		2,672		743		15,911		19,326		33,646		52,972		348
Real estate – commercial & farmland		4,020		3,929		41,250		49,199		205,903		255,102		636
Real estate – residential		6,283		772		12,155		19,210		87,897		107,107		60
Consumer installment loans		68		6		255		329		636		965		—

Total	$	13,572	$	5,891	$	76,904	$	96,367	$	347,150	$	443,517	$	1,107


	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
	(Dollars in Thousands)
As of December 30, 2012:
Commercial, financial & agricultural	$	2,390	$	1,105	$	10,612	$	14,107	$	18,499	$	32,606	$	98
Real estate – construction & development		1,584		2,592		19,656		23,832		46,352		70,184		1,077
Real estate – commercial & farmland		11,451		7,373		52,570		71,394		207,112		278,506		1,347
Real estate – residential		6,066		3,396		24,976		34,438		90,618		125,056		779
Consumer installment loans		45		13		258		316		1,044		1,360		—

Total	$	21,536	$	14,479	$	108,072	$	144,087	$	363,625	$	507,712	$	3,301


	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
	(Dollars in Thousands)
As of June 30, 2012:
Commercial, financial & agricultural	$	851	$	754	$	12,703	$	14,308	$	27,064	$	41,372	$	298
Real estate – construction & development		2,688		3,007		25,021		30,716		53,275		83,991		—
Real estate – commercial & farmland		12,452		7,656		60,879		80,987		241,406		322,393		891
Real estate – residential		5,366		3,180		31,607		40,153		110,530		150,683		78
Consumer installment loans		70		40		430		540		2,758		3,298		—

Total	$	21,427	$	14,637	$	130,640	$	166,704	$	435,033	$	601,737	$	1,267

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. 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. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. 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 non-covered impaired loans:


	As of and For the Period Ended
	June 30, 2013		December 31, 2012		June 30, 2012
	(Dollars in Thousands)
Nonaccrual loans	$	31,811	$	38,885	$	44,421
Troubled debt restructurings not included above		18,015		18,744		22,970

Total impaired loans	$	49,826	$	57,629	$	67,391


Impaired loans not requiring a related allowance	$	—	$	—	$	—

Impaired loans requiring a related allowance	$	49,826	$	57,629	$	67,391

Allowance related to impaired loans	$	5,072	$	5,115	$	7,136

Average investment in impaired loans	$	54,481	$	70,209	$	78,432

Interest income recognized on impaired loans	$	451	$	495	$	153

Foregone interest income on impaired loans	$	172	$	718	$	332

The following table presents an analysis of information pertaining to non-covered impaired loans as of June 30, 2013, December 31, 2012 and June 30, 2012.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	7,723	$	—	$	5,384	$	5,384	$	1,018	$	4,960
Real estate – construction & development		15,324		—		7,394		7,394		687		9,894
Real estate – commercial & farmland		19,759		—		16,491		16,491		1,657		18,692
Real estate – residential		23,373		—		19,893		19,893		1,692		20,178
Consumer installment loans		808		—		664		664		18		757

Total	$	66,987	$	—	$	49,826	$	49,826	$	5,072	$	54,481


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2012:
Commercial, financial & agricultural	$	8,024	$	—	$	4,940	$	4,940	$	743	$	4,968
Real estate – construction & development		20,316		—		11,016		11,016		910		11,706
Real estate – commercial & farmland		25,076		—		20,910		20,910		2,191		30,638
Real estate – residential		24,155		—		19,848		19,848		1,246		21,813
Consumer installment loans		1,187		—		915		915		25		1,084

Total	$	78,758	$	—	$	57,629	$	57,629	$	5,115	$	70,209


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2012:
Commercial, financial & agricultural	$	8,116	$	—	$	4,968	$	4,968	$	692	$	4,936
Real estate – construction & development		18,805		—		10,184		10,184		1,070		12,611
Real estate – commercial & farmland		32,265		—		27,021		27,021		2,081		37,111
Real estate – residential		27,069		—		24,014		24,014		3,254		22,637
Consumer installment loans		1,331		—		1,204		1,204		39		1,137

Total	$	87,586	$	—	$	67,391	$	67,391	$	7,136	$	78,432

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


	As of and For the Period Ended
	June 30, 2013		December 31, 2012		June 30, 2012
	(Dollars in Thousands)
Nonaccrual loans	$	88,939	$	115,712	$	151,225
Troubled debt restructurings not included above		22,709		19,194		14,842

Total impaired loans	$	111,648	$	134,906	$	166,067


Impaired loans not requiring a related allowance	$	111,648	$	134,906	$	166,067

Impaired loans requiring a related allowance	$	—	$	—	$	—

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	122,220	$	163,825	$	178,130

Interest income recognized on impaired loans	$	784	$	849	$	628

Foregone interest income on impaired loans	$	242	$	491	$	482

The following table presents an analysis of information pertaining to impaired covered loans as of June 30, 2013, December 31, 2012 and June 30, 2012.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	12,150	$	8,769	$	—	$	8,769	$	—	$	9,442
Real estate – construction & development		28,494		22,830		—		22,830		—		23,348
Real estate – commercial & farmland		65,516		53,837		—		53,837		—		57,962
Real estate – residential		31,535		25,927		—		25,927		—		31,191
Consumer installment loans		340		285		—		285		—		277

Total	$	138,035	$	111,648	$	—	$	111,648	$	—	$	122,220


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2012:
Commercial, financial & agricultural	$	27,060	$	10,802	$	—	$	10,802	$	—	$	12,506
Real estate – construction & development		85,279		23,236		—		23,236		—		29,970
Real estate – commercial & farmland		159,493		64,231		—		64,231		—		78,790
Real estate – residential		63,559		36,335		—		36,335		—		42,061
Consumer installment loans		393		302		—		302		—		498

Total	$	335,784	$	134,906	$	—	$	134,906	$	—	$	163,825


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2012:
Commercial, financial & agricultural	$	22,616	$	13,464	$	—	$	13,464	$	—	$	13,250
Real estate – construction & development		46,439		30,586		—		30,586		—		34,260
Real estate – commercial & farmland		110,388		81,330		—		81,330		—		85,639
Real estate – residential		58,645		40,033		—		40,033		—		44,393
Consumer installment loans		1,034		654		—		654		—		588

Total	$	239,122	$	166,067	$	—	$	166,067	$	—	$	178,130

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. 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, 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, 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, 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 sound worth 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 loss 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 non-covered loan portfolio by risk grade as of June 30, 2013.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	37,173	$	—	$	298	$	498	$	6,883	$	—	$	44,852
15		17,783		4,934		154,369		63,078		1,527		—		241,691
20		82,636		36,654		402,677		137,518		19,586		29,534		708,605
23		108		6,878		9,575		13,104		165		—		29,830
25		60,981		75,273		189,109		110,244		7,497		—		443,104
30		3,154		3,183		12,104		10,666		159		—		29,266
40		5,991		7,685		20,522		22,577		1,104		—		57,879
50		598		—		—		—		—		—		598
60		—		—		—		—		2		—		2

Total	$	208,424	$	134,607	$	788,654	$	357,685	$	36,923	$	29,534	$	1,555,827

The following table presents the non-covered loan portfolio by risk grade as of December 31, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	24,623	$	—	$	309	$	464	$	7,597	$	—	$	32,993
15		11,316		4,373		147,966		71,254		1,591		—		236,500
20		79,522		31,413		351,997		114,418		21,361		43,239		641,950
23		42		8,521		9,012		13,788		70		—		31,433
25		49,071		52,577		176,395		113,591		7,576		—		399,210
30		2,343		3,394		19,401		9,672		488		—		35,298
40		7,200		13,765		27,242		23,292		1,495		—		72,994
50		100		156		—		1		—		—		257
60		—		—		—		—		—		—		—

Total	$	174,217	$	114,199	$	732,322	$	346,480	$	40,178	$	43,239	$	1,450,635

The following table presents the non-covered loan portfolio by risk grade as of June 30, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	20,395	$	17	$	230	$	414	$	7,226	$	—	$	28,282
15		11,909		3,628		158,608		75,752		1,260		—		251,157
20		79,985		39,077		287,874		93,018		23,537		17,071		540,562
23		—		6,691		9,578		13,839		23		—		30,131
25		54,072		57,266		170,342		109,269		7,035		—		397,984
30		1,404		4,018		17,870		12,461		554		—		36,307
40		7,137		13,703		30,902		27,306		1,776		—		80,824
50		1		156		—		65		20		—		242
60		—		—		—		—		—		—		—

Total	$	174,903	$	124,556	$	675,404	$	332,124	$	41,431	$	17,071	$	1,365,489

The following table presents the covered loan portfolio by risk grade as of June 30, 2013.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		27		1,571		634		—		—		2,232
20		2,815		10,533		36,360		25,277		231		—		75,216
23		69		1,666		11,323		2,671		—		—		15,729
25		8,469		11,574		118,867		41,408		348		—		180,666
30		1,999		3,505		26,144		9,175		25		—		40,848
40		14,019		25,667		60,837		27,942		361		—		128,826
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	27,371	$	52,972	$	255,102	$	107,107	$	965	$	—	$	443,517

The following table presents the covered loan portfolio by risk grade as of December 31, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		39		1,640		644		—		—		2,323
20		3,997		12,194		37,098		31,337		292		—		84,918
23		28		1,174		9,576		2,052		—		—		12,830
25		10,013		19,216		114,849		40,194		558		—		184,830
30		4,294		7,214		38,665		11,883		50		—		62,106
40		14,274		30,347		76,678		38,946		460		—		160,705
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	32,606	$	70,184	$	278,506	$	125,056	$	1,360	$	—	$	507,712

The following table presents the covered loan portfolio by risk grade as of June 30, 2012.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	172	$	9	$	—	$	857	$	412	$	—	$	1,450
15		115		47		1,717		560		10		—		2,449
20		5,963		15,440		37,729		38,108		745		—		97,985
23		11		1,602		3,784		1,840		—		—		7,237
25		13,545		19,814		139,886		49,254		1,254		—		223,753
30		4,544		9,843		38,306		10,873		89		—		63,655
40		17,017		37,236		100,971		49,080		788		—		205,092
50		5		—		—		111		—		—		116
60		—		—		—		—		—		—		—

Total	$	41,372	$	83,991	$	322,393	$	150,683	$	3,298	$	—	$	601,737

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 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 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 that 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, approved by the Company’s Senior 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 2013 totaling $20.7 million and loans in 2012 totaling $40.3 million under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

The following table presents the amount of troubled debt restructurings by loan class, classified separately as accrual and non-accrual at June 30, 2013, December 31, 2012 and June 30, 2012:


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		7	$	1,059		—	$	—
Real estate – construction & development		7		1,946		1		29
Real estate – commercial & farmland		16		7,529		2		1,493
Real estate – residential		30		7,468		6		1,046
Consumer installment		1		13		—		—

Total		61	$	18,015		9	$	2,568


As of December 31, 2012	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		5	$	802		—	$	—
Real estate – construction & development		5		1,735		—		—
Real estate – commercial & farmland		16		8,947		3		4,149
Real estate – residential		28		7,254		2		1,022
Consumer installment		1		6		—		—

Total		55	$	18,744		5	$	5,171


As of June 30, 2012	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		—	$	—		1	$	18
Real estate – construction & development		5		1,205		2		1,124
Real estate – commercial & farmland		16		13,293		2		2,815
Real estate – residential		24		8,472		5		1,213

Total		45	$	22,970		10	$	5,170

The following table presents the amount of troubled debt restructurings by loan class, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at June 30, 2013, December 31, 2012 and June 30, 2012:


As of June 30, 2013	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		7	$	1,059		—	$	—
Real estate – construction & development		7		1,946		1		29
Real estate – commercial & farmland		16		7,529		2		1,493
Real estate – residential		31		7,788		5		726
Consumer installment		1		13		—		—

Total		62	$	18,335		8	$	2,248


As of December 31, 2012	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		5	$	802		—	$	—
Real estate – construction & development		5		1,735		—		—
Real estate – commercial & farmland		16		8,947		3		4,149
Real estate – residential		28		7,254		2		1,022
Consumer installment		—		—		1		6

Total		54	$	18,738		6	$	5,177


As of June 30, 2012	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		1	$	18		—	$	—
Real estate – construction & development		6		2,305		1		24
Real estate – commercial & farmland		18		16,108		—		—
Real estate – residential		25		8,529		4		1,156

Total		50	$	26,960		5	$	1,180

The following table presents the amount of troubled debt restructurings by types of concessions made, classified separately as accrual and non-accrual at June 30, 2013, December 31, 2012 and June 30, 2012:


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Type of concession:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Forbearance of interest		9	$	2,168		2	$	105
Forgiveness of principal		3		1,493		1		145
Payment modification only		2		373		—		—
Rate reduction only		12		6,924		2		496
Rate reduction, forbearance of interest		18		4,724		1		222
Rate reduction, forbearance of principal		17		2,333		2		1,571
Rate reduction, payment modification		—		—		1		29

Total		61	$	18,015		9	$	2,568


As of December 31, 2012	Accruing Loans				Non-Accruing Loans
Type of concession:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Forbearance of interest		2	$	1,873		—	$	—
Forgiveness of principal		3		1,518		1		372
Payment modification only		2		376		—		—
Rate reduction only		11		7,075		1		177
Rate reduction, forbearance of interest		18		4,061		2		3,420
Rate reduction, forbearance of principal		18		3,798		—		—
Rate reduction, payment modification		1		43		1		1,202

Total		55	$	18,744		5	$	5,171


As of June 30, 2012	Accruing Loans				Non-Accruing Loans
Type of concession:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Forbearance of interest		3	$	2,092		—	$	—
Forgiveness of principal		4		1,897		—		—
Payment modification only		1		91		1		251
Rate reduction only		8		6,141		4		929
Rate reduction, forbearance of interest		12		8,292		4		2,891
Rate reduction, forbearance of principal		16		4,401		1		1,099
Rate reduction, payment modification		1		56		—		—

Total		45	$	22,970		10	$	5,170

The following table presents the amount of troubled debt restructurings by collateral types, classified separately as accrual and non-accrual at June 30, 2013, December 31, 2012 and June 30, 2012:


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Warehouse		2	$	345		2	$	1,493
Raw land		3		1,354		1		29
Agricultural land		1		66		—		—
Hotel & motel		3		2,233		—		—
Office		4		2,085		—		—
Retail, including strip centers		6		2,800		—		—
1-4 family residential		34		8,061		6		1,046
Life insurance policy		1		249		—		—
Automobile/equipment/inventory		5		522		—		—
Unsecured		2		300		—		—

Total		61	$	18,015		9	$	2,568


As of December 31, 2012	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Warehouse		3	$	1,692		1	$	177
Raw land		2		1,337		—		—
Hotel & motel		3		2,318		—		—
Office		4		2,105		1		2,770
Retail, including strip centers		6		2,833		1		1,202
1-4 family residential		31		7,651		2		1,022
Life insurance policy		1		250		—		—
Automobile/equipment/inventory		4		508		—		—
Unsecured		1		50		—		—

Total		55	$	18,744		5	$	5,171


As of June 30, 2012	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Warehouse		1	$	1,341		—	$	—
Raw land		5		2,878		—		—
Hotel & motel		3		2,406		—		—
Office		2		1,513		1		2,770
Retail, including strip centers		8		6,228		1		45
1-4 family residential		26		8,604		8		2,355

Total		45	$	22,970		10	$	5,170

As of June 30, 2013, December 31, 2012 and June 30, 2012, the Company had a balance of $20.6 million, $23.9 million and $28.2 million, respectively, in troubled debt restructurings. The Company has recorded $2.0 million, $1.9 million and $2.0 million in previous charge-offs on such loans at June 30, 2013, December 31, 2012 and June 30, 2012, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $482,000, $640,000 and $868,000 at June 30, 2013, December 31, 2012 and June 30, 2012, respectively. At June 30, 2013, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

Allowance for Loan Losses

The allowance for loan losses represents a reserve for inherent 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 independent auditors and 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 data such as 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 their markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

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, with the exception of credit card receivables and overdraft protection loans which 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. Many of the larger loans require an annual review by an independent loan officer or an independent third party loan review firm. As a result of these loan reviews, certain loans may be assigned specific reserve allocations. 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 Director of Internal Audit.

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.

During the six months ended June 30, 2013, the year ended December 31, 2012 and the six months ended June 30, 2012, the Company recorded provision for loan loss expense of $790,000, $2.6 million and $1.4 million, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. These amounts are excluded from the rollforwards below but are reflected in the Company’s Consolidated Statements of Earnings and Comprehensive Income.

The following table details activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2013, the year ended December 31, 2012 and the six months ended June 30, 2012. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in Thousands)
Balance, January 1, 2013	$	2,439		$	5,343		$	9,157		$	5,898		$	756		$	23,593
Provision for loan losses		1,118			1,526			1,420			2,340			(106	)		6,298
Loans charged off		(734	)		(1,231	)		(1,793	)		(2,107	)		(371	)		(6,236	)
Recoveries of loans previously charged off		128			4			13			229			188			562

Balance, June 31, 2013	$	2,951		$	5,642		$	8,797		$	6,360		$	467		$	24,217


Period-end amount allocated to:
Loans individually evaluated for impairment	$	876		$	467		$	1,629		$	1,573		$	—		$	4,545
Loans collectively evaluated for impairment		2,075			5,175			7,168			4,787			467			19,672

Ending balance	$	2,951		$	5,642		$	8,797		$	6,360		$	467		$	24,217


Loans:
Individually evaluated for impairment	$	3,705		$	3,935		$	15,842		$	15,329		$	—		$	38,811
Collectively evaluated for impairment		204,719			130,672			772,812			342,356			66,457			1,517,016

Ending balance	$	208,424		$	134,607		$	788,654		$	357,685		$	66,457		$	1,555,827


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in Thousands)
Balance, January 1, 2012	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156
Provision for loan losses		815			5,245			15,000			6,267			1,124			28,451
Loans charged off		(1,451	)		(9,380	)		(20,551	)		(8,722	)		(1,059	)		(41,163	)
Recoveries of loans previously charged off		157			40			482			225			245			1,149

Balance, December 31, 2012	$	2,439		$	5,343		$	9,157		$	5,898		$	756		$	23,593


Period-end amount allocated to:
Loans individually evaluated for impairment	$	659		$	611		$	2,228		$	1,056		$	—		$	4,554
Loans collectively evaluated for impairment		1,780			4,732			6,929			4,842			756			19,039

Ending balance	$	2,439		$	5,343		$	9,157		$	5,898		$	756		$	23,593


Loans:
Individually evaluated for impairment	$	3,351		$	7,617		$	21,332		$	13,020		$	—		$	45,320
Collectively evaluated for impairment		170,866			106,582			710,990			333,460			83,417			1,405,315

Ending balance	$	174,217		$	114,199		$	732,322		$	346,480		$	83,417		$	1,450,635


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in Thousands)
Balance, January 1, 2012	$	2,918		$	9,438		$	14,226		$	8,128		$	446		$	35,156
Provision for loan losses		425			1,795			11,153			3,751			1,546			18,670
Loans charged off		(654	)		(5,211	)		(17,484	)		(4,374	)		(352	)		(28,075	)
Recoveries of loans previously charged off		78			19			24			162			164			447

Balance, June 30, 2012	$	2,767		$	6,041		$	7,919		$	7,667		$	1,804		$	26,198


Period-end amount allocated to:
Loans individually evaluated for impairment	$	623		$	898		$	1,999		$	3,109		$	3		$	6,632
Loans collectively evaluated for impairment		2,144			5,143			5,920			4,558			1,801			19,566

Ending balance	$	2,767		$	6,041		$	7,919		$	7,667		$	1,804		$	26,198


Loans:
Individually evaluated for impairment	$	2,776		$	7,173		$	24,838		$	19,088		$	16		$	53,891
Collectively evaluated for impairment		172,127			117,383			650,566			313,036			58,486			1,311,598

Ending balance	$	174,903		$	124,556		$	675,404		$	332,124		$	58,502		$	1,365,489