Loans

3 Months Ended

Mar. 31, 2018

Receivables [Abstract]

LOANS

Note E - Loans

Information pertaining to portfolio loans, purchased credit impaired (“PCI”) loans, and purchased unimpaired loans (“PUL”) loans is as follows:

	March 31, 2018
	Portfolio Loans		PCI Loans		PULs		Total
	(In thousands)
Construction and land development	$	253,416	$	1,150	$	119,678	$	374,244
Commercial real estate		1,197,152		9,855		438,232		1,645,239
Residential real estate		888,534		1,869		174,749		1,065,152
Commercial and financial		536,321		819		79,562		616,702
Consumer		188,195		0		7,593		195,788
NET LOAN BALANCES 1	$	3,063,618	$	13,693	$	819,814	$	3,897,125

	December 31, 2017
	Portfolio Loans		PCI Loans		PULs		Total
	(In thousands)
Construction and land development	$	215,315	$	1,121	$	126,689	$	343,125
Commercial real estate		1,170,618		9,776		459,598		1,639,992
Residential real estate		845,420		5,626		187,764		1,038,810
Commercial and financial		512,430		894		92,690		606,014
Consumer		178,826		0		10,610		189,436
NET LOAN BALANCES 1	$	2,922,609	$	17,417	$	877,351	$	3,817,377

⁽¹⁾ Net loan balances as of March 31, 2018 and December 31, 2017 include deferred costs of $13.9 million and $12.9 million for each period, respectively.

The following tables present the contractual delinquency of the recorded investment by class of loans as of:

	March 31, 2018
							Accruing
			Accruing		Accruing		Greater				Total
			30-59 Days		60-89 Days		Than				Financing
	Current		Past Due		Past Due		90 Days		Nonaccrual		Receivables
	(In thousands)
Portfolio Loans
Construction and land development	$	253,189	$	0	$	0	$	0	$	227	$	253,416
Commercial real estate		1,194,839		1,296		0		0		1,017		1,197,152
Residential real estate		877,943		1,179		82		0		9,330		888,534
Commerical and financial		530,801		3,149		173		229		1,969		536,321
Consumer		187,818		218		74		0		85		188,195
Total		3,044,590		5,842		329		229		12,628		3,063,618
Purchased Unimpaired Loans
Construction and land development		119,539		139		0		0		0		119,678
Commercial real estate		436,589		609		326		0		708		438,232
Residential real estate		170,128		527		0		0		4,094		174,749
Commerical and financial		79,400		2		0		0		160		79,562
Consumer		7,588		0		5		0		0		7,593
Total		813,244		1,277		331		0		4,962		819,814
Purchased Credit Impaired Loans
Construction and land development		1,150		0		0		0		0		1,150
Commercial real estate		9,427		0		0		0		428		9,855
Residential real estate		548		0		0		0		1,321		1,869
Commerical and financial		819		0		0		0		0		819
Consumer		0		0		0		0		0		0
Total		11,944		0		0		0		1,749		13,693
Total Loans	$	3,869,778	$	7,119	$	660	$	229	$	19,339	$	3,897,125

	December 31, 2017
							Accruing
			Accruing		Accruing		Greater				Total
			30-59 Days		60-89 Days		Than				Financing
	Current		Past Due		Past Due		90 Days		Nonaccrual		Receivables
	(In thousands)
Portfolio Loans
Construction and land development	$	215,077	$	0	$	0	$	0	$	238	$	215,315
Commercial real estate		1,165,738		2,605		585		0		1,690		1,170,618
Residential real estate		836,117		812		75		0		8,416		845,420
Commerical and financial		507,501		2,776		26		0		2,127		512,430
Consumer		178,676		52		0		0		98		178,826
Total		2,903,109		6,245		686		0		12,569		2,922,609
Purchased Unimpaired Loans
Construction and land development		126,655		34		0		0		0		126,689
Commercial real estate		457,899		979		0		0		720		459,598
Residential real estate		186,549		128		87		0		1,000		187,764
Commerical and financial		92,315		54		0		0		321		92,690
Consumer		10,610		0		0		0		0		10,610
Total		874,028		1,195		87		0		2,041		877,351
Purchased Credit Impaired Loans
Construction and land development		1,121		0		0		0		0		1,121
Commercial real estate		9,352		0		0		0		424		9,776
Residential real estate		544		642		0		0		4,440		5,626
Commerical and financial		844		0		0		0		50		894
Consumer		0		0		0		0		0		0
Total		11,861		642		0		0		4,914		17,417
Total Loans	$	3,788,998	$	8,082	$	773	$	0	$	19,524	$	3,817,377

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.  Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention. 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 on loans classified as Doubtful is generally charged off.  Risk ratings are updated any time the situation warrants.

Loans that are not problem or potential problem loans 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, 2018 and December 31, 2017:

	March 31, 2018
			Special
	Pass		Mention		Substandard		Doubtful		Total
	(In thousands)
Construction and land development	$	363,778	$	8,471	$	1,995	$	0	$	374,244
Commercial real estate		1,596,893		29,421		18,925		0		1,645,239
Residential real estate		1,036,786		2,456		25,910		0		1,065,152
Commerical and financial		608,025		3,056		4,067		1,554		616,702
Consumer		193,867		1,333		588		0		195,788
Total	$	3,799,349	$	44,737	$	51,485	$	1,554	$	3,897,125

	December 31, 2017
			Special
	Pass		Mention		Substandard		Doubtful		Total
	(In thousands)
Construction and land development	$	328,127	$	10,414	$	4,584	$	0	$	343,125
Commercial real estate		1,586,932		29,273		23,787		0		1,639,992
Residential real estate		1,023,925		4,621		10,203		61		1,038,810
Commerical and financial		593,689		3,237		8,838		250		606,014
Consumer		189,354		0		82		0		189,436
Total	$	3,722,027	$	47,545	$	47,494	$	311	$	3,817,377

PCI 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 non-accretable difference.

The table below summarizes the changes in accretable yield on PCI loans for the periods ended:

	March 31,
(In thousands)	2018		2017
Beginning balance	$	3,699	$	3,807
Additions		0		0
Deletions		(43)		0
Accretion		(443)		(365)
Reclassification from non-accretable difference		339		68
Ending balance	$	3,552	$	3,510

Troubled Debt Restructured Loans

The Company’s Troubled Debt Restructuring (“TDR”) concessions granted generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements. Most loans prior to modification were classified as an impaired loan and the allowance for loan losses is determined in accordance with Company policy.

The following table presents loans that were modified during the three months ended:

			Pre-		Post-
			Modification		Modification
	Number		Outstanding		Outstanding		Specific		Valuation
	of		Recorded		Recorded		Reserve		Allowance
	Contracts		Investment		Investment		Recorded		Recorded
	(In thousands)
March 31, 2018
Total loans		0	$	0	$	0	$	0	$	0
March 31, 2017
Construction and land development		1	$	52	$	46	$	0	$	6
Total loans		1	$	52	$	46	$	0	$	6

During the three months end March 31, 2018 and March 31, 2017, there were no payment defaults on loans that had been modified to a TDR within the previous twelve months. The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to other real estate owned. A defaulted TDR is generally placed on nonaccrual and specific allowance for loan loss is assigned in accordance with the Company’s policy.

Impaired Loans

Loans are considered impaired if they are 90 days or more past due, in nonaccrual status, or are TDRs. As of March 31, 2018 and December 31, 2017, the Company’s recorded investment in impaired loans, excluding PCI loans, and related valuation allowance was as follows:

	March 31, 2018
			Unpaid		Related
	Recorded		Principal		Valuation
	Investment		Balance		Allowance
	(In thousands)
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	213	$	497	$	0
Commercial real estate		2,777		4,196		0
Residential real estate		14,156		19,042		0
Commercial and financial		166		177		0
Consumer		93		134		0
Impaired Loans with an Allowance Recorded:
Construction and land development		238		251		26
Commercial real estate		4,749		4,749		178
Residential real estate		7,744		7,932		1,094
Commercial and financial		2,197		878		1,406
Consumer		275		279		41
Total Impaired Loans
Construction and land development		451		748		26
Commercial real estate		7,526		8,945		178
Residential real estate		21,900		26,974		1,094
Commercial and financial		2,363		1,055		1,406
Consumer		368		413		41
Total	$	32,608	$	38,135	$	2,745

	December 31, 2017
			Unpaid		Related
	Recorded		Principal		Valuation
	Investment		Balance		Allowance
				(In thousands)
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	223	$	510	$	0
Commercial real estate		3,475		4,873		0
Residential real estate		10,272		15,063		0
Commercial and financial		19		29		0
Consumer		105		180		0
Impaired Loans with an Allowance Recorded:
Construction and land development		251		264		23
Commercial real estate		4,780		4,780		195
Residential real estate		8,448		8,651		1,091
Commercial and financial		2,436		883		1,050
Consumer		282		286		43
Total Impaired Loans
Construction and land development		474		774		23
Commercial real estate		8,255		9,653		195
Residential real estate		18,720		23,714		1,091
Commercial and financial		2,455		912		1,050
Consumer		387		466		43
Total	$	30,291	$	35,519	$	2,402

Impaired loans also include TDRs where concessions have been granted to borrowers who have experienced financial difficulty. At March 31, 2018 and at December 31, 2017, accruing TDRs totaled $14.8 million and $15.6 million, respectively.

 

Average impaired loans for the three months ended March 31, 2018 and 2017 were $31.1 million and $30.4 million, respectively. The impaired loans were measured for impairment based on the value of underlying collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. The valuation allowance is included in the allowance for loan losses.

Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful at which time payments received are recorded as reductions in principal. For the three month periods ended March 31, 2018, and 2017, the Company recorded $0.4 million, respectively, in interest income on impaired loans.

For impaired loans whose impairment is measured based on the present value of expected future cash flows, a total of $88,000 and $61,000, respectively, was included in interest income for the three months ended March 31, 2018 and 2017, and represents the change in present value attributable to the passage of time.