Loans

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



	June 30, 2018
	Portfolio Loans		PCI Loans		PULs		Total
	(In thousands)
Construction and land development	$	250,314	$	126	$	108,630	$	359,070
Commercial real estate	1,297,051		10,878		393,366		1,701,295
Residential real estate	941,728		1,417		160,800		1,103,945
Commercial and financial	548,758		794		69,318		618,870
Consumer	183,718		0		7,118		190,836
Totals ¹	$	3,221,569	$	13,215	$	739,232	$	3,974,016



	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
Totals ¹	$	2,922,609	$	17,417	$	877,351	$	3,817,377

(1) Net loan balances as of June 30, 2018 and December 31, 2017 include deferred costs of $15.0 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:



	June 30, 2018
	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing Receivables
	(In thousands)
Portfolio Loans
Construction and land development	$	250,053	$	44	$	0	$	0	$	217	$	250,314
Commercial real estate	1,286,765		788		0		0		9,498		1,297,051
Residential real estate	930,666		2,296		0		0		8,766		941,728
Commerical and financial	543,301		4,544		0		0		913		548,758
Consumer	183,410		144		0		0		164		183,718
Totals	3,194,195		7,816		0		0		19,558		3,221,569

Purchased Unimpaired Loans
Construction and land development	108,017		613		0		0		0		108,630
Commercial real estate	390,619		2,339		0		0		408		393,366
Residential real estate	155,520		1,274		109		0		3,897		160,800
Commerical and financial	67,366		1,459		0		493		0		69,318
Consumer	7,098		20		0		0		0		7,118
Totals	728,620		5,705		109		493		4,305		739,232

Purchased Credit Impaired Loans
Construction and land development	126		0		0		0		0		126
Commercial real estate	9,451		0		0		0		1,427		10,878
Residential real estate	570		0		0		0		847		1,417
Commerical and financial	749		0		0		0		45		794
Consumer	0		0		0		0		0		0
Totals	10,896		0		0		0		2,319		13,215

Totals	$	3,933,711	$	13,521	$	109	$	493	$	26,182	$	3,974,016



	December 31, 2017
	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing 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
Commercial and financial	507,501		2,776		26		0		2,127		512,430
Consumer	178,676		52		0		0		98		178,826
Totals	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
Commercial and financial	92,315		54		0		0		321		92,690
Consumer	10,610		0		0		0		0		10,610
Totals	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
Commercial and financial	844		0		0		0		50		894
Consumer	0		0		0		0		0		0
Totals	11,861		642		0		0		4,914		17,417

Totals	$	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 June 30, 2018 and December 31, 2017:



	June 30, 2018
	Pass		Special Mention		Substandard		Doubtful		Total
	(In thousands)
Construction and land development	$	351,792	$	6,456	$	822	$	0	$	359,070
Commercial real estate	1,647,630		19,716		33,949		0		1,701,295
Residential real estate	1,077,202		2,341		24,402		0		1,103,945
Commercial and financial	612,333		214		6,223		100		618,870
Consumer	188,894		1,338		604		0		190,836
Totals	$	3,877,851	$	30,065	$	66,000	$	100	$	3,974,016



	December 31, 2017
	Pass		Special 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
Commercial and financial	593,689		3,237		8,838		250		606,014
Consumer	189,354		0		82		0		189,436
Totals	$	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:



	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2018			2017			2018			2017
Beginning balance	$	3,552		$	3,510		$	3,699		$	3,807
Additions	0			0			0			0
Deletions	0			(10		)	(43		)	(10		)
Accretion	(262		)	(451		)	(705		)	(816		)
Reclassification from non-accretable difference	(101		)	216			238			284
Ending balance	$	3,189		$	3,265		$	3,189		$	3,265

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 impaired and the allowance for loan losses is determined in accordance with Company policy.

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



	Number of Contracts	Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Specific Reserve Recorded		Valuation Allowance Recorded
	(In thousands)
June 30, 2018
Commercial and financial	1	$	98	$	0	$	0	$	0
Totals	1	$	98	$	0	$	0	$	0
June 30, 2017
Construction and land development	1	$	52	$	46	$	6	$	6
Residential real estate	1	15		15		0		0
Totals	2	$	67	$	61	$	6	$	6

During the three and six months ended June 30, 2018, there was one payment default on a loan of $0.1 million that had been modified to a TDR within the previous twelve months, compared to none during the three and six months ended June 30, 2017. 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 a 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 June 30, 2018 and December 31, 2017, the Company’s recorded investment in impaired loans, excluding PCI loans, the unpaid principal balance and related valuation allowance was as follows:



	June 30, 2018
	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
	(In thousands)
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	204	$	484	$	0
Commercial real estate	2,549		3,764		0
Residential real estate	13,847		18,352		0
Commercial and financial	0		0		0
Consumer	172		211		0
Impaired Loans with an Allowance Recorded:
Construction and land development	224		238		24
Commercial real estate	13,116		13,144		525
Residential real estate	6,820		7,014		933
Commercial and financial	933		927		550
Consumer	267		273		41
Total Impaired Loans
Construction and land development	428		722		24
Commercial real estate	15,665		16,908		525
Residential real estate	20,667		25,366		933
Commercial and financial	933		927		550
Consumer	439		484		41
Totals	$	38,132	$	44,407	$	2,073



	December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Valuation 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
Totals	$	30,291	$	35,519	$	2,402

Impaired loans also include TDRs where concessions have been granted to borrowers who have experienced financial difficulty. At June 30, 2018 and at December 31, 2017, accruing TDRs totaled $14.2 million and $15.6 million, respectively.

Average impaired loans for the three months ended June 30, 2018 and 2017 were $34.4 million and $32.8 million, respectively. Average impaired loans for the six months ended June 30, 2018 and 2017 were $32.2 million and $31.7 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 months ended June 30, 2018 and 2017, the Company recorded interest income on impaired loans of $0.6 million and $0.4 million, respectively. For the six months ended June 30, 2018, and 2017, the Company recorded interest income on impaired loans of $0.9 million and $0.7 million, respectively.

For impaired loans whose impairment is measured based on the present value of expected future cash flows, interest income represents the change in present value attributable to the passage of time, and totaled $33,000 and $64,000, respectively, for the three months ended June 30, 2018 and 2017 and $121,000 and $113,000, respectively, for the six months ended June 30, 2018 and 2017.