LOANS

3 Months Ended

Mar. 31, 2015

NOTE E — LOANS

Information relating to portfolio loans, purchased credit impaired (PCI), and purchased unimpaired loans (PUL) is summarized as follows:

March 31, 2015	Portfolio Loans		PCI Loans		PUL's		Total

	(Dollars in thousands)
Construction and land development	$	80,850	$	1,472	$	18,019	$	100,341
Commercial real estate		639,875		3,684		205,365		848,924
Residential real estate		642,488		699		40,411		683,598
Commercial and financial		135,221		1,263		27,566		164,050
Consumer		55,475		1		1,763		57,239
Other loans		335		0		0		335
NET LOAN BALANCES	$	1,554,244	$	7,119	$	293,124	$	1,854,487

December 31, 2014	Portfolio Loans		PCI Loans		PUL's		Total
	(Dollars in thousands)
Construction and land development	$	65,896	$	1,557	$	19,583	$	87,036
Commercial real estate		610,863		4,092		222,192		837,147
Residential real estate		639,428		851		46,618		686,897
Commercial and financial		120,763		1,312		35,321		157,396
Consumer		50,543		2		2,352		52,897
Other loans		512		0		0		512
NET LOAN BALANCES	$	1,488,005	$	7,814	$	326,066	$	1,821,885

Net loan balances as of March 31, 2015 and December 31, 2014 are net of deferred costs of $5,007,000 and $3,645,000, respectively.

Purchased Loans - PCI loans are accounted for pursuant to ASC Topic 310-30. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference.

We have applied ASC Topic 310-20 accounting treatment to PULs. The unamortized credit mark established at acquisition on the loans has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans.

The table below summarizes the changes in total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of PCI loans during the three month period ending March 31, 2015. Contractually required principal and interest payments have been adjusted for estimated prepayments.

	December 31, 2014		Deletions		Accretion		Reclassifications from nonaccretable difference		March 31, 2015
	(In thousands)
Contractually required principal and interest	$	14,831	$	(1,547)	$	0	$	0	$	13,284
Nonaccretable difference		(5,825)		664		0		85		(5,076)
Cash flows expected to be collected		9,006		(883)		0		85		8,208
Accretable yield		(1,192)		85		103		(85)		(1,089)
Carrying value of acquired loans		7,814		(798)		103		0		7,119
Allowance for loan losses		(64)								(93)
Carrying value less allowance for loan losses	$	7,750	$	(798)	$	103	$	0	$	7,026

The following table presents the contractual aging of the recorded investment in past due loans by class of loans as of March 31, 2015 and December 31, 2014:

					Accruing
	Accruing		Accruing		Greater						Total
March 31, 2015	30-59 Days		60-89 Days		Than						Financing
(Dollars in thousands)	Past Due		Past Due		90 Days		Nonaccrual		Current		Receivables

Portfolio Loans
Construction and land development	$	361	$	0	$	0	$	521	$	79,968	$	80,850
Commercial real estate		686		0		0		2,948		636,241		639,875
Residential real estate		215		1,024		179		13,139		627,931		642,488
Commerical and financial		227		149		0		0		134,845		135,221
Consumer		47		0		0		252		55,176		55,475
Other		0		0		0		0		335		335
Total		1,536		1,173		179		16,860		1,534,496	$	1,554,244

Purchased Unimpaired Loans
Construction and land development		0		0		48		0		17,971	$	18,019
Commercial real estate		114		284		133		1,850		202,984		205,365
Residential real estate		35		0		11		4		40,361		40,411
Commerical and financial		159		0		0		0		27,407		27,566
Consumer		0		0		0		0		1,763		1,763
Other		0		0		0		0		0		0
Total		308		284		192		1,854		290,486	$	293,124

Purchased Credit Impaired Loans
Construction and land development		0		0		0		1,346		126	$	1,472
Commercial real estate		0		5		0		729		2,950		3,684
Residential real estate		0		0		114		267		318		699
Commerical and financial		0		0		0		0		1,263		1,263
Consumer		0		0		0		0		1		1
Other		0		0		0		0		0		0
Total		0		5		114		2,342		4,658	$	7,119

Total Loans	$	1,844	$	1,462	$	485	$	21,056	$	1,829,640	$	1,854,487

					Accruing
	Accruing		Accruing		Greater						Total
December 31, 2014	30-59 Days		60-89 Days		Than						Financing
(Dollars in thousands)	Past Due		Past Due		90 Days		Nonaccrual		Current		Receivables

Portfolio Loans
Construction and land development	$	0	$	0	$	0	$	534	$	65,362	$	65,896
Commercial real estate		764		0		0		3,457		606,642		610,863
Residential real estate		259		159		17		14,381		624,612		639,428
Commerical and financial		232		0		0		0		120,531		120,763
Consumer		256		25		0		191		50,071		50,543
Other		0		0		0		0		512		512
Total	$	1,511	$	184	$	17	$	18,563	$	1,467,730	$	1,488,005

Purchased Unimpaired Loans
Construction and land development	$	303	$	0	$	0	$	0	$	19,280	$	19,583
Commercial real estate		2,318		0		41		0		219,833		222,192
Residential real estate		142		0		39		5		46,432		46,618
Commerical and financial		953		0		0		0		34,368		35,321
Consumer		0		0		0		0		2,352		2,352
Other		0		0		0		0		0		0
Total	$	3,716	$	0	$	80	$	5	$	322,265	$	326,066

Purchased Impaired Loans
Construction and land development	$	0	$	0	$	0	$	1,428	$	129	$	1,557
Commercial real estate		7		359		0		733		2,993		4,092
Residential real estate		88		0		116		411		236		851
Commerical and financial		0		0		0		0		1,312		1,312
Consumer		0		0		0		0		2		2
Other		0		0		0		0		0		0
Total	$	95	$	359	$	116	$	2,572	$	4,672	$	7,814

Total Loans	$	5,322	$	543	$	213	$	21,140	$	1,794,667	$	1,821,885

The Company utilizes an internal asset classification system as a means of reporting problem and potential problem loans. Under the Company’s risk rating system, the Company classifies problem and potential problem loans as “Special Mention,” “Substandard,” and “Doubtful” and these loans are monitored on an ongoing basis. Substandard loans include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loans classified as substandard may require a specific allowance, but generally does not exceed 30% of the principal balance. Loans classified as Doubtful, have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are generally charged off. Loans that do not currently expose the Company to sufficient risk to warrant classification in one of the aforementioned categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention. Risk ratings are updated any time the situation warrants.

Loans not meeting the criteria above are considered to be pass-rated loans and risk grades are recalculated at least annually by the loan relationship manager. The following tables present the risk category of loans by class of loans based on the most recent analysis performed as of March 31, 2015 and December 31, 2014:

March 31, 2015
	Construction						Commercial
	& Land		Commercial		Residential		and		Consumer
(Dollars in thousands)	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	92,445	$	807,856	$	653,225	$	162,182	$	56,073	$	1,771,781
Special mention		2,070		12,665		1,382		1,019		592		17,728
Substandard		1,830		15,518		1,734		732		261		20,075
Doubtful		0		0		0		0		0		0
Nonaccrual		1,867		5,527		13,410		0		252		21,056
Pass-Troubled debt restructures		1,665		1,752		14		0		0		3,431
Troubled debt restructures		464		5,606		13,833		117		396		20,416
	$	100,341	$	848,924	$	683,598	$	164,050	$	57,574	$	1,854,487

December 31, 2014
	Construction						Commercial
	& Land		Commercial		Residential		and		Consumer
(Dollars in thousands)	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	79,397	$	797,934	$	655,518	$	155,281	$	51,764	$	1,739,894
Special mention		1,815		11,709		546		993		590		15,653
Substandard		1,685		15,325		1,733		1,002		456		20,201
Doubtful		0		0		0		0		0		0
Nonaccrual		1,963		4,189		14,797		0		191		21,140
Pass-Troubled debt restructures		1,672		2,332		17		0		0		4,021
Troubled debt restructures		504		5,658		14,286		120		408		20,976
	$	87,036	$	837,147	$	686,897	$	157,396	$	53,409	$	1,821,885

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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