Allowance for Loan Losses

(In Thousands)

The following is a summary of total non purchased and purchased loans as of the dates presented:



	June 30, 2018			December 31, 2017
Commercial, financial, agricultural	$	987,818		$	1,039,393
Lease financing	55,749			57,354
Real estate – construction	712,818			633,389
Real estate – 1-4 family mortgage	2,433,099			2,343,721
Real estate – commercial mortgage	3,461,174			3,427,530
Installment loans to individuals	120,325			122,276
Gross loans	7,770,983			7,623,663
Unearned income	(3,326		)	(3,341		)
Loans, net of unearned income	7,767,657			7,620,322
Allowance for loan losses	(47,355		)	(46,211		)
Net loans	$	7,720,302		$	7,574,111

Allowance for Loan Losses

The allowance for loan losses is maintained at a level believed adequate by management based on its ongoing analysis of the loan portfolio to absorb probable credit losses inherent in the entire loan portfolio, including collective impairment as recognized under ASC 450, “Contingencies”. Collective impairment is calculated based on loans grouped by grade. Another component of the allowance is losses on loans assessed as impaired under ASC 310. The balance of these loans and their related allowance is included in management’s estimation and analysis of the allowance for loan losses. Management and the internal loan review staff evaluate the adequacy of the allowance for loan losses quarterly. The allowance for loan losses is evaluated based on a continuing assessment of problem loans, the types of loans, historical loss experience, new lending products, emerging credit trends, changes in the size and character of loan categories and other factors, including its risk rating system, regulatory guidance and economic conditions. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance for loan losses is established through a provision for loan losses charged to earnings resulting from measurements of inherent credit risk in the loan portfolio and estimates of probable losses or impairments of individual loans. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The following table provides a roll forward of the allowance for loan losses and a breakdown of the ending balance of the allowance based on the Company’s impairment methodology for the periods presented:



	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Three Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	7,071		$	4,198	$	11,404		$	21,914		$	1,814		$	46,401
Charge-offs	(457		)	—		(979		)	(46		)	(99		)	(1,581		)
Recoveries	114			3		83			496			29			725
Net (charge-offs) recoveries	(343		)	3		(896		)	450			(70		)	(856		)
Provision for loan losses charged to operations	418			501		1,149			86			(344		)	1,810
Ending balance	$	7,146		$	4,702	$	11,657		$	22,450		$	1,400		$	47,355



	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Six Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	5,542		$	3,428	$	12,009		$	23,384		$	1,848		$	46,211
Charge-offs	(1,116		)	—		(1,650		)	(659		)	(221		)	(3,646		)
Recoveries	349			7		216			604			54			1,230
Net (charge-offs) recoveries	(767		)	7		(1,434		)	(55		)	(167		)	(2,416		)
Provision for loan losses charged to operations	2,371			1,267		1,082			(879		)	(281		)	3,560
Ending balance	$	7,146		$	4,702	$	11,657		$	22,450		$	1,400		$	47,355
Period-End Amount Allocated to:
Individually evaluated for impairment	$	417		$	—	$	76		$	1,014		$	8		$	1,515
Collectively evaluated for impairment	6,404			4,702		11,053			20,036			1,389			43,584
Purchased with deteriorated credit quality	325			—		528			1,400			3			2,256
Ending balance	$	7,146		$	4,702	$	11,657		$	22,450		$	1,400		$	47,355



	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total
Three Months Ended June 30, 2017
Allowance for loan losses:
Beginning balance	$	5,112		$	2,119	$	12,162		$	22,073		$	1,457		$	42,923
Charge-offs	(304		)	—		(551		)	(434		)	(125		)	(1,414		)
Recoveries	64			3		64			717			42			890
Net (charge-offs) recoveries	(240		)	3		(487		)	283			(83		)	(524		)
Provision for loan losses charged to operations	220			458		429			244			399			1,750
Ending balance	$	5,092		$	2,580	$	12,104		$	22,600		$	1,773		$	44,149




	Commercial			Real Estate - Construction		Real Estate - 1-4 Family Mortgage			Real Estate - Commercial Mortgage			Installment and Other⁽¹⁾			Total

Six Months Ended June 30, 2017
Allowance for loan losses:
Beginning balance	$	5,486		$	2,380	$	14,294		$	19,059		$	1,518		$	42,737
Charge-offs	(1,136		)	—		(826		)	(661		)	(389		)	(3,012		)
Recoveries	121			34		146			812			61			1,174
Net (charge-offs) recoveries	(1,015		)	34		(680		)	151			(328		)	(1,838		)
Provision for loan losses charged to operations	621			166		(1,510		)	3,390			583			3,250
Ending balance	$	5,092		$	2,580	$	12,104		$	22,600		$	1,773		$	44,149
Period-End Amount Allocated to:
Individually evaluated for impairment	$	166		$	2	$	878		$	2,159		$	3		$	3,208
Collectively evaluated for impairment	4,587			2,578		10,534			19,313			1,769			38,781
Purchased with deteriorated credit quality	339			—		692			1,128			1			2,160
Ending balance	$	5,092		$	2,580	$	12,104		$	22,600		$	1,773		$	44,149


(1)	Includes lease financing receivables.

The following table provides the recorded investment in loans, net of unearned income, based on the Company’s impairment methodology as of the dates presented:



	Commercial		Real Estate - Construction		Real Estate - 1-4 Family Mortgage		Real Estate - Commercial Mortgage		Installment and Other⁽¹⁾		Total
June 30, 2018
Individually evaluated for impairment	$	2,697	$	—	$	11,561	$	7,213	$	686	$	22,157
Collectively evaluated for impairment	974,706		712,818		2,375,162		3,311,268		170,505		7,544,459
Purchased with deteriorated credit quality	10,415		—		46,376		142,693		1,557		201,041
Ending balance	$	987,818	$	712,818	$	2,433,099	$	3,461,174	$	172,748	$	7,767,657
December 31, 2017
Individually evaluated for impairment	$	3,064	$	1,777	$	14,482	$	10,545	$	439	$	30,307
Collectively evaluated for impairment	1,021,014		631,612		2,275,270		3,260,648		174,211		7,362,755
Purchased with deteriorated credit quality	15,315		—		53,969		156,337		1,639		227,260
Ending balance	$	1,039,393	$	633,389	$	2,343,721	$	3,427,530	$	176,289	$	7,620,322


(1)	Includes lease financing receivables.