Loans

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Loans

Note E

Loans

Information relating to portfolio, purchase credit impaired (“PCI”), and purchase unimpaired (“PUL”) loans at December 31 is summarized as follows:

	2016
	Portfolio Loans		PCI Loans		PUL's		Total
	(In thousands)
Construction and land development	$	137,480	$	114	$	22,522	$	160,116
Commercial real estate		1,041,915		11,257		304,420		1,357,592
Residential real estate		784,290		684		51,813		836,787
Commercial and financial		308,731		941		60,917		370,589
Consumer		152,927		0		1,018		153,945
Other loans		507		0		0		507
NET LOAN BALANCES (1)	$	2,425,850	$	12,996	$	440,690	$	2,879,536

	2015
	Portfolio Loans		PCI Loans		PUL's		Total
	(In thousands)
Construction and land development	$	97,629	$	114	$	11,044	$	108,787
Commercial real estate		776,875		9,990		222,513		1,009,378
Residential real estate		678,131		922		44,732		723,785
Commercial and financial		188,013		1,083		39,421		228,517
Consumer		82,717		0		2,639		85,356
Other loans		507		0		0		507
NET LOAN BALANCES (1)	$	1,823,872	$	12,109	$	320,349	$	2,156,330

(1) Net loan balances at December 31, 2016 and 2015 include deferred costs of $4.4 million  and $7.7 million, respectively.

Purchased LoansPCI 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 components of purchased loans are as follows at December 31, 2016 and 2015:

	December 31, 2016						December 31, 2015
	PCI		PULs		Total		PCI		PULs		Total
	(In thousands)						(In thousands)
Construction and land development	$	114	$	22,522	$	22,636	$	114	$	11,045	$	11,159
Commercial real estate		11,257		304,420		315,677		9,990		222,513		232,503
Residential real estate		684		51,813		52,497		922		44,732		45,654
Commercial and financial		941		60,917		61,858		1,083		39,420		40,503
Consumer		0		1,018		1,018		0		2,639		2,639
Carrying value of acquired loans	$	12,996	$	440,690	$	453,686	$	12,109	$	320,349	$	332,458
Carrying value, net of allowance of $0 for 2016 and $137 for 2015	$	12,996	$	440,690	$	453,686	$	12,109	$	320,212	$	332,321

The table below summarizes the changes in accretable yield for PCI loans during the twelve months ended December 31, 2016, and December 31, 2015. See Note S for information related to PCI loans acquired during the period.

									Reclassifications from
Activity during the twelve month period ending December 31, 2016	12/31/2015		Additions		Deletions		Accretion		nonaccretable difference		12/31/2016
	(In thousands)
Accretable yield	$	2,610	$	2,052	$	(15)	$	(1,734)	$	894	$	3,807
Carrying value	$	12,109									$	12,996
Allowance for loan losses		0										0
Carrying value less allowance for loan losses	$	12,109									$	12,996

									Reclassifications from
Activity during the twelve month period ending December 31, 2015	12/31/2014		Additions		Deletions		Accretion		nonaccretable difference		12/31/2015
	(In thousands)
Accretable yield	$	1,192	$	702	$	(357)	$	(601)	$	1,674	$	2,610
Carrying value of acquired loans	$	7,814									$	12,109
Allowance for loan losses		(64)										0
Carrying value less allowance for loan losses	$	7,750									$	12,109

									Reclassifications from
Activity during the three month period ending December 31, 2014	9/30/2014		Additions		Deletions		Accretion		nonaccretable difference		12/31/2014
	(In thousands)
Accretable yield	$	0	$	1,256	$	(50)	$	(96)	$	82	$	1,192
Carrying value of acquired loans	$	0									$	7,814
Allowance for loan losses		0										(64)
Carrying value less allowance for loan losses	$	0									$	7,750

 

Loans to directors and executive officers totaled $2.1 million and $4.0 million at December 31, 2016 and 2015, respectively. During 2016, new loans to directors and officer totaling $1.2 million were made, and reductions totaled $3.1 million.

At December 31, 2016 and 2015 loans pledged as collateral for borrowings totaled $415 million and $50 million, respectively.

Loans are made to individuals, as well as commercial and tax-exempt entities.  Specific loan terms vary as to interest rate, repayment, and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower. 

Concentrations of Credit The Company’s lending activity primarily occurs within the State of Florida, including Orlando in Central Florida and Southeast coastal counties from Brevard County in the north to Palm Beach County in the south, as well as the counties surrounding Lake Okeechobee in the center of the state. The Company’s loan portfolio consists of approximately 60% commercial and commercial real estate loans and 40% consumer and residential real estate loans.

The Company’s extension of credit is governed by the Credit Risk Policy which was established to control the quality of the Company’s loans.  These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.

Construction and Land Development Loans  The Company defines construction and land development loans as exposures secured by land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or significant source of repayment is from rental income associated with that property (that is, loans for which 50 percent or more of the source of repayment comes from third party, non-affiliated rental income) or the proceeds of the sale, refinancing, or permanent financing of the property.

Commercial Real Estate Loans   The Company’s goal is to create and maintain a high quality portfolio of commercial real estate loans with customers who meet the quality and relationship profitability objectives of the Company.  Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans.  These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on the successful operation of the property.  Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type.

Residential Real Estate Loans The Company selectively adds residential mortgage loans to its portfolio, primarily loans with adjustable rates, home equity mortgages and home equity lines. Substantially all residential originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. 

Commercial and Financial Loans   Commercial credit is extended primarily to small to medium sized professional firms, retail and wholesale operators and light industrial and manufacturing concerns.   Such credits typically comprise working capital loans, loans for physical asset expansion, asset acquisition and other business loans. Loans to closely held businesses will generally be guaranteed in full or for a meaningful amount by the businesses’ major owners. Commercial loans are made based primarily on the historical and projected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower.  The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors.  Minimum standards and underwriting guidelines have been established for all commercial loan types.

Consumer Loans   The Company originates consumer loans including installment loans, loans for automobiles, boats, and other personal, family and household purposes. For each loan type several factors including debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower is considered during the underwriting process.

The following tables present the contractual aging of the recorded investment in past due loans by class of loans as of December 31, 2016 and 2015:

					Accruing
	Accruing		Accruing		Greater						Total
	30-59 Days		60-89 Days		Than						Financing
December 31, 2016	Past Due		Past Due		90 Days		Nonaccrual		Current		Receivables
Portfolio Loans
Construction and land development	$	0	$	0	$	0	$	438	$	137,042	$	137,480
Commercial real estate		78		171		0		1,784		1,039,882		1,041,915
Residential real estate		1,570		261		0		8,582		773,877		784,290
Commerical and financial		30		0		0		49		308,652		308,731
Consumer		29		59		0		170		152,669		152,927
Other		0		0		0		0		507		507
Total Loans	$	1,707	$	491	$	0	$	11,023	$	2,412,629	$	2,425,850
Purchased Loans
Construction and land development	$	0	$	0	$	0	$	32	$	22,490	$	22,522
Commercial real estate		345		485		0		1,272		302,318		304,420
Residential real estate		153		0		0		1,262		50,398		51,813
Commerical and financial		39		328		0		197		60,353		60,917
Consumer		37		0		0		0		981		1,018
Other		0		0		0		0		0		0
Total Loans	$	574	$	813	$	0	$	2,763	$	436,540	$	440,690
Purchased Impaired Loans
Construction and land development	$	0	$	0	$	0	$	0	$	114	$	114
Commercial real estate		0		0		0		4,285		6,972		11,257
Residential real estate		0		185		0		0		499		684
Commerical and financial		0		0		0		0		941		941
Consumer		0		0		0		0		0		0
Other		0		0		0		0		0		0
Total Loans	$	0	$	185	$	0	$	4,285	$	8,526	$	12,996

	Accruing		Accruing		Greater						Total
	30-59 Days		60-89 Days		Than						Financing
December 31, 2015	Past Due		Past Due		90 Days		Nonaccrual		Current		Receivables
Portfolio Loans
Construction and land development	$	665	$	0	$	0	$	269	$	96,695	$	97,629
Commercial real estate		810		0		0		2,301		773,764		776,875
Residential real estate		141		0		0		9,941		668,049		678,131
Commerical and financial		59		0		0		0		187,954		188,013
Consumer		430		0		0		247		82,040		82,717
Other		0		0		0		0		507		507
Total Loans	$	2,105	$	0	$	0	$	12,758	$	1,809,009	$	1,823,872
Purchased Loans
Construction and land development	$	0	$	0	$	0	$	40	$	11,004	$	11,044
Commercial real estate		179		0		0		2,294		220,040		222,513
Residential real estate		66		0		0		0		44,666		44,732
Commerical and financial		39		0		0		130		39,252		39,421
Consumer		39		0		0		0		2,600		2,639
Other		0		0		0		0		0		0
Total Loans	$	323	$	0	$	0	$	2,464	$	317,562	$	320,349
Purchased Impaired Loans
Construction and land development	$	0	$	0	$	0	$	0	$	114	$	114
Commercial real estate		132		0		0		1,816		8,042		9,990
Residential real estate		0		0		0		348		574		922
Commerical and financial		0		0		0		0		1,083		1,083
Consumer		0		0		0		0		0		0
Other		0		0		0		0		0		0
Total Loans	$	132	$	0	$	0	$	2,164	$	9,813	$	12,109

Nonaccrual loans and loans past due ninety days or more were $18.1 million and $17.4 million at December 31, 2016 and 2015, respectively. The reduction in interest income associated with loans on nonaccrual status was approximately $0.7 million, $0.6 million, and $1.9 million, for the years ended December 31, 2016, 2015, and 2014, respectively.

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. 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 December 31, 2016 and 2015:

	Construction
	& Land		Commercial		Residential		Commercial &		Consumer
December 31, 2016	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	148,563	$	1,319,696	$	811,576	$	364,241	$	153,730	$	2,797,806
Special mention		5,037		17,184		1,780		3,949		67		28,017
Substandard		5,497		7,438		2,709		2,153		134		17,931
Doubtful		0		0		0		0		0		0
Nonaccrual		470		7,341		9,844		246		170		18,071
Pass - Troubled debt restructures		44		4,988		358		0		44		5,434
Troubled debt restructures		505		945		10,520		0		307		12,277
Total	$	160,116	$	1,357,592	$	836,787	$	370,589	$	154,452	$	2,879,536

	Construction
	& Land		Commercial		Residential		Commercial &		Consumer
December 31, 2015	Development		Real Estate		Real Estate		Financial		Loans		Total
Pass	$	100,186	$	973,942	$	697,907	$	226,391	$	83,786	$	2,082,212
Special mention		3,377		12,599		629		1,209		1,392		19,206
Substandard		4,242		9,278		3,197		769		70		17,556
Doubtful		0		0		0		0		0		0
Nonaccrual		309		6,410		10,290		130		247		17,386
Pass - Troubled debt restructures		58		5,893		0		18		0		5,969
Troubled debt restructures		615		1,256		11,762		0		368		14,001
Total	$	108,787	$	1,009,378	$	723,785	$	228,517	$	85,863	$	2,156,330