Note 4 - Loans and Allowance for Loan Losses

The following is a summary of non‑acquired loans:


	December 31,
(Dollars in thousands)	2015		2014
Non-acquired loans:
Commercial non-owner occupied real estate:
Construction and land development	$	401,979	$	364,221
Commercial non-owner occupied		487,777		333,590
Total commercial non-owner occupied real estate		889,756		697,811
Consumer real estate:
Consumer owner occupied		1,018,984		786,778
Home equity loans		319,255		283,934
Total consumer real estate		1,338,239		1,070,712
Commercial owner occupied real estate		1,033,398		907,913
Commercial and industrial		503,808		405,923
Other income producing property		175,848		150,928
Consumer		233,104		189,317
Other loans		46,573		45,222
Total non-acquired loans		4,220,726		3,467,826
Less allowance for loan losses		(34,090)		(34,539)
Non-acquired loans, net	$	4,186,636	$	3,433,287

The above table includes deferred fees, net of deferred costs, totaling $1.2 million and $2.1 million at December 31, 2015 and 2014, respectively.

The following is a summary of acquired non‑credit impaired loans accounted for under FASB ASC Topic 310‑20, net of the related discount:


	December 31,
(Dollars in thousands)	2015		2014
FASB ASC Topic 310-20 acquired loans:
Commercial non-owner occupied real estate:
Construction and land development	$	13,849	$	24,099
Commercial non-owner occupied		40,103		49,476
Total commercial non-owner occupied real estate		53,952		73,575
Consumer real estate:
Consumer owner occupied		518,107		646,375
Home equity loans		190,968		234,949
Total consumer real estate		709,075		881,324
Commercial owner occupied real estate		39,220		62,065
Commercial and industrial		25,475		41,130
Other income producing property		51,169		65,139
Consumer		170,647		204,766
Total FASB ASC Topic 310-20 acquired loans	$	1,049,538	$	1,327,999

In accordance with FASB ASC Topic 310‑30, the Company aggregated acquired loans that have common risk characteristics into pools of loan categories as described in the table below.

The following is a summary of acquired credit impaired loans accounted for under FASB ASC Topic 310‑30 (identified as credit impaired at the time of acquisition), net of related discount:


	December 31,
(Dollars in thousands)	2015		2014
FASB ASC Topic 310-30 acquired loans:
Commercial loans greater than or equal to $1 million-CBT	$	12,628	$	15,813
Commercial real estate		255,430		325,109
Commercial real estate—construction and development		54,272		65,262
Residential real estate		313,319		390,244
Consumer		70,734		85,449
Commercial and industrial		31,193		44,804
Single pay		—		86
Total FASB ASC Topic 310-30 acquired loans		737,576		926,767
Less allowance for loan losses		(3,706)		(7,365)
FASB ASC Topic 310-30 acquired loans, net	$	733,870	$	919,402

The table below reflects refined contractual loan payments (principal and interest), estimates of the amounts not expected to be collected (non-accretable difference), accretable yield (interest income recognized over time), and the resulting fair values at the acquisition date for FFHI (July 26, 2013) for loans accounted for using ASC Topic 310-30. These refinements did not change the carrying value of these pools of loans. The changes were the result of the conversion to one loan system and a better projection of the timing of cash flows for these acquired credit impaired loans.


	July 26, 2013
			Loans
	Loans Impaired		Not Impaired
(Dollars in thousands)	at Acquisition		at Acquisition		Total
Contractual principal and interest	$	662,273	$	238,166	$	900,439
Non-accretable difference		(110,069)		(11,905)		(121,974)
Cash flows expected to be collected		552,204		226,261		778,465
Accretable difference		(129,834)		(52,122)		(181,956)
Carrying value	$	422,370	$	174,139	$	596,509

Contractual loan payments receivable, estimates of amounts not expected to be collected, other fair value adjustments and the resulting carrying values of acquired credit impaired loans as of December 31, 2015, and 2014 are as follows:


	December 31,
(Dollars in thousands)	2015		2014
Contractual principal and interest	$	968,857	$	1,337,703
Non-accretable difference		(29,743)		(104,110)
Cash flows expected to be collected		939,114		1,233,593
Accretable yield		(201,538)		(306,826)
Carrying value	$	737,576	$	926,767
Allowance for acquired loan losses	$	(3,706)	$	(7,365)

Income on acquired credit impaired loans that are not impaired at the acquisition date is recognized in the same manner as loans impaired at the acquisition date. A portion of the fair value discount on acquired non‑impaired loans has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans. The remaining nonaccretable difference represents cash flows not expected to be collected.

The following are changes in the carrying value of acquired credit impaired loans:


	Year Ended December 31,
(Dollars in thousands)	2015		2014		2013
Balance at beginning of period	$	919,402	$	1,220,638	$	969,395
Fair value of acquired loans		—		—		596,509
Net reductions for payments, foreclosures, and accretion		(189,191)		(299,329)		(344,348)
Change in the allowance for loan losses on acquired loans		3,659		(1,907)		(918)
Balance at end of period, net of allowance for loan losses on acquired loans	$	733,870	$	919,402	$	1,220,638

The following are changes in the carrying amount of accretable yield for acquired credit impaired loans:


	Year Ended December 31,
(Dollars in thousands)	2015		2014		2013
Balance at beginning of period	$	306,826	$	301,516	$	160,849
Addition from the FFHI acquisition		—		—		181,956
Accretion		(97,847)		(105,254)		(104,705)
Reclass of nonaccretable difference due to improvement in expected cash flows		61,985		112,316		71,136
Other changes, net		(69,426)		(1,752)		(7,720)
Balance at end of period	$	201,538	$	306,826	$	301,516

During the first quarter of 2015, the accretable balance declined significantly by $64.1 million. This decline was the result of an increase in the assumed prepayment speed of certain acquired loan pools from the FFHI acquisition. The actual cash flows were faster than what had been previously expected. The result was a decrease in the accretable yield balance; however, there was no impairment since this changed the timing of the receipt of future cash on these pools of loans.

On December 13, 2006, the FDIC, the Federal Reserve, and other regulatory agencies collectively revised the banking agencies’ 1993 policy statement on the allowance for loan and lease losses to ensure consistency with generally accepted accounting principles in the United States and more recent supervisory guidance. Our loan loss policy adheres to the interagency guidance.

The allowance for loan losses is based upon estimates made by management. We maintain an allowance for loan losses at a level that we believe is appropriate to cover estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated credit losses inherent in the remainder of our loan portfolio. Arriving at the allowance involves a high degree of management judgment and results in a range of estimated losses. We regularly evaluate the adequacy of the allowance through our internal risk rating system, outside credit review, and regulatory agency examinations to assess the quality of the loan portfolio and identify problem loans. The evaluation process also includes our analysis of current economic conditions, composition of the loan portfolio, past due and nonaccrual loans, concentrations of credit, lending policies and procedures, and historical loan loss experience. While management uses available information to recognize losses on loans, future additions to the allowance may be necessary based on, among other factors, changes in economic conditions in our markets. In addition, regulatory agencies, as an integral part of their examination process, periodically review our allowances for losses on loans. These agencies may require management to recognize additions to the allowances based on their judgments about information available to them at the time of their examination. Because of these and other factors, it is possible that the allowances for losses on loans may change. The provision for loan losses is charged to expense in an amount necessary to maintain the allowance at an appropriate level.

The allowance for loan losses on non‑acquired loans consists of general and specific reserves. The general reserves are determined by applying loss percentages to the portfolio that are based on historical loss experience for each class of loans and management’s evaluation and “risk grading” of the loan portfolio. Additionally, the general economic and business conditions affecting key lending areas, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, the findings of internal and external credit reviews and results from external bank regulatory examinations are included in this evaluation. Currently, these adjustments are applied to the non‑acquired loan portfolio when estimating the level of reserve required. The specific reserves are determined on a loan‑by‑loan basis based on management’s evaluation of our exposure for each credit, given the current payment status of the loan and the value of any underlying collateral. These are loans classified by management as doubtful or substandard. For such loans that are also classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. Generally, the need for specific reserve is evaluated on impaired loans, and once a specific reserve is established for a loan, a charge off of that amount occurs in the quarter subsequent to the establishment of the specific reserve. Loans that are determined to be impaired are provided a specific reserve, if necessary, and are excluded from the calculation of the general reserves.

With the FFHI acquisition, the Company segregated the loan portfolio into performing loans (“non‑credit impaired) and purchased credit impaired loans. The performing loans and revolving type loans are accounted for under FASB ASC 310‑20, with each loan being accounted for individually. The allowance for loan losses on these loans will be measured and recorded consistent with non‑acquired loans. The acquired credit impaired loans will follow the description in the next paragraph.

In determining the acquisition date fair value of purchased loans, and in subsequent accounting, the Company generally aggregates purchased loans into pools of loans with common risk characteristics. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of the future cash flows of the pool is reasonably estimable. Subsequent to the acquisition date, increases in cash flows over those expected at the acquisition date are reclassified from the non‑accretable difference to accretable yield and recognized as interest income prospectively. Decreases in expected cash flows after the acquisition date are recognized by recording an allowance for loan losses. Management analyzes the acquired loan pools using various assessments of risk to determine an expected loss. The expected loss is derived based upon a loss given default based upon the collateral type and/or detailed review by loan officers and the probability of default that is determined based upon historical data at the loan level. All acquired loans managed by Special Asset Management are reviewed quarterly and assigned a loss given default. Acquired loans not managed by Special Asset Management are reviewed twice a year in a similar method to the Company’s originated portfolio of loans which follow review thresholds based on risk rating categories. In the fourth quarter of 2015, the Company modified its methodology to a more granular approach in determining loss given default on substandard loans with a net book balance between $100,000 and $500,000 by adjusting the loss given default to 90% of the most current collateral valuation based on appraised value. Substandard loans greater than $500,000 was individually assigned loss given defaults each quarter. Trends are reviewed in terms of accrual status, past due status, and weighted‑average grade of the loans within each of the accounting pools. In addition, the relationship between the change in the unpaid principal balance and change in the mark is assessed to correlate the directional consistency of the expected loss for each pool. Offsetting the impact of the provision established for acquired loans covered under FDIC loss share agreements, the receivable from the FDIC is adjusted to reflect the indemnified portion of the post‑acquisition exposure with a corresponding credit to the provision for loan losses. (For further discussion of the Company’s allowance for loan losses on acquired loans, see Note 1—Summary of Significant Accounting Policies and Note 2—Mergers and Acquisitions.)

An aggregated analysis of the changes in allowance for loan losses is as follows:


	Non-acquired		Acquired Non-Credit		Acquired Credit
(Dollars in thousands)	Loans		Impaired Loans		Impaired Loans		Total
Year Ended December 31, 2015:
Balance at beginning of period	$	34,539	$	—	$	7,365	$	41,904
Loans charged-off		(6,180)		(2,787)		—		(8,967)
Recoveries of loans previously charged off		2,801		387		—		3,188
Net charge-offs		(3,379)		(2,400)		—		(5,779)
Provision for loan losses		2,930		2,400		(252)		5,078
Benefit attributable to FDIC loss share agreements		—		—		786		786
Total provision for loan losses charged to operations		2,930		2,400		534		5,864
Provision for loan losses recorded through the FDIC loss share receivable		—		—		(786)		(786)
Reduction due to loan removals		—		—		(3,407)		(3,407)
Balance at end of period	$	34,090	$	—	$	3,706	$	37,796
Year Ended December 31, 2014:
Balance at beginning of period	$	34,331	$	—	$	11,618	$	45,949
Loans charged-off		(7,516)		(1,531)		—		(9,047)
Recoveries of loans previously charged off		2,574		604		—		3,178
Net charge-offs		(4,942)		(927)		—		(5,869)
Provision for loan losses		5,150		927		(1,907)		4,170
Benefit attributable to FDIC loss share agreements		—		—		2,420		2,420
Total provision for loan losses charged to operations		5,150		927		513		6,590
Provision for loan losses recorded through the FDIC loss share receivable		—		—		(2,420)		(2,420)
Reduction due to loan removals		—		—		(2,346)		(2,346)
Balance at end of period	$	34,539	$	—	$	7,365	$	41,904
Year Ended December 31, 2013:
Balance at beginning of period	$	44,378	$	—	$	17,218	$	61,596
Loans charged-off		(15,289)		—		—		(15,289)
Recoveries of loans previously charged off		4,224		—		—		4,224
Net charge-offs		(11,065)		—		—		(11,065)
Provision for loan losses		1,018		—		(918)		100
Benefit attributable to FDIC loss share agreements		—		—		1,786		1,786
Total provision for loan losses charged to operations		1,018		—		868		1,886
Provision for loan losses recorded through the FDIC loss share receivable		—		—		(1,786)		(1,786)
Reduction due to loan removals		—		—		(4,682)		(4,682)
Balance at end of period	$	34,331	$	—	$	11,618	$	45,949

The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for non‑acquired loans:


	Construction		Commercial		Commercial		Consumer						Other Income
	& Land		Non-owner		Owner		Owner		Home		Commercial		Producing				Other
(Dollars in thousands)	Development		Occupied		Occupied		Occupied		Equity		& Industrial		Property		Consumer		Loans		Total
Year Ended December 31, 2015:
Allowance for loan losses:
Balance at beginning of period	$	5,666	$	3,154	$	8,415	$	6,866	$	2,829	$	3,561	$	2,232	$	1,367	$	449	$	34,539
Charge-offs		(219)		(156)		(851)		(374)		(547)		(357)		(102)		(3,574)		—		(6,180)
Recoveries		376		67		31		143		244		844		85		1,011		—		2,801
Provision (benefit)		(1,707)		503		746		577		403		(74)		(252)		2,890		(156)		2,930
Balance at end of period	$	4,116	$	3,568	$	8,341	$	7,212	$	2,929	$	3,974	$	1,963	$	1,694	$	293	$	34,090
Loans individually evaluated for impairment	$	615	$	34	$	101	$	138	$	3	$	279	$	422	$	3	$	12	$	1,607
Loans collectively evaluated for impairment	$	3,501	$	3,534	$	8,240	$	7,074	$	2,926	$	3,695	$	1,541	$	1,691	$	281	$	32,483
Loans:
Loans individually evaluated for impairment	$	6,280	$	1,452	$	7,725	$	7,549	$	309	$	1,487	$	4,891	$	102	$	423	$	30,218
Loans collectively evaluated for impairment		395,699		486,325		1,025,673		1,011,435		318,946		502,321		170,957		233,002		46,150		4,190,508
Total non-acquired loans	$	401,979	$	487,777	$	1,033,398	$	1,018,984	$	319,255	$	503,808	$	175,848	$	233,104	$	46,573	$	4,220,726
Year Ended December 31, 2014:
Allowance for loan losses:
Balance at beginning of period	$	6,789	$	3,677	$	7,767	$	6,069	$	2,782	$	3,592	$	2,509	$	937	$	209	$	34,331
Charge-offs		(237)		(442)		(531)		(382)		(1,000)		(1,114)		(309)		(3,501)		—		(7,516)
Recoveries		421		390		95		271		69		264		191		873		—		2,574
Provision (benefit)		(1,307)		(471)		1,084		908		978		819		(159)		3,058		240		5,150
Balance at end of period	$	5,666	$	3,154	$	8,415	$	6,866	$	2,829	$	3,561	$	2,232	$	1,367	$	449	$	34,539
Loans individually evaluated for impairment	$	475	$	77	$	172	$	144	$	1	$	41	$	646	$	2	$	—	$	1,558
Loans collectively evaluated for impairment	$	5,191	$	3,077	$	8,243	$	6,722	$	2,828	$	3,520	$	1,586	$	1,365	$	449	$	32,981
Loans:
Loans individually evaluated for impairment	$	4,852	$	3,610	$	9,160	$	2,966	$	31	$	908	$	5,498	$	60	$	—	$	27,085
Loans collectively evaluated for impairment		359,369		329,980		898,753		783,812		283,903		405,015		145,430		189,257		45,222		3,440,741
Total non-acquired loans	$	364,221	$	333,590	$	907,913	$	786,778	$	283,934	$	405,923	$	150,928	$	189,317	$	45,222	$	3,467,826
Year Ended December 31, 2013:
Allowance for loan losses:
Balance at beginning of period	$	10,836	$	4,921	$	8,743	$	6,568	$	3,626	$	4,939	$	3,747	$	781	$	217	$	44,378
Charge-offs		(4,656)		(660)		(2,695)		(1,462)		(1,219)		(1,329)		(816)		(2,452)		—		(15,289)
Recoveries		1,395		353		41		633		228		514		224		836		—		4,224
Provision		(786)		(937)		1,678		330		147		(532)		(646)		1,772		(8)		1,018
Balance at end of period	$	6,789	$	3,677	$	7,767	$	6,069	$	2,782	$	3,592	$	2,509	$	937	$	209	$	34,331
Loans individually evaluated for impairment	$	704	$	—	$	10	$	271	$	—	$	—	$	646	$	—	$	—	$	1,631
Loans collectively evaluated for impairment	$	6,085	$	3,677	$	7,757	$	5,798	$	2,782	$	3,592	$	1,863	$	937	$	209	$	32,700
Loans:
Loans individually evaluated for impairment	$	5,739	$	2,681	$	11,560	$	3,013	$	—	$	405	$	2,649	$	—	$	—	$	26,047
Loans collectively evaluated for impairment		294,212		288,490		821,953		545,157		257,139		321,419		140,555		136,410		33,834		2,839,169
Total non-acquired loans	$	299,951	$	291,171	$	833,513	$	548,170	$	257,139	$	321,824	$	143,204	$	136,410	$	33,834	$	2,865,216

The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for acquired non-credit impaired loans:


	Construction		Commercial		Commercial		Consumer						Other Income
	& Land		Non-owner		Owner		Owner		Home		Commercial		Producing
(Dollars in thousands)	Development		Occupied		Occupied		Occupied		Equity		& Industrial		Property		Consumer		Total
Year Ended December 31, 2015
Allowance for loan losses:
Balance at beginning of period	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Charge-offs		—		—		—		(360)		(1,662)		(118)		(4)		(643)		(2,787)
Recoveries		4		—		—		102		237		19		4		21		387
Provision (benefit)		(4)		—		—		258		1,425		99		—		622		2,400
Balance, December 31, 2015	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		13,849		40,103		39,220		518,107		190,968		25,475		51,169		170,647		1,049,538
Total acquired non-credit impaired loans	$	13,849	$	40,103	$	39,220	$	518,107	$	190,968	$	25,475	$	51,169	$	170,647	$	1,049,538
Year Ended December 31, 2014
Allowance for loan losses:
Balance at beginning of period	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Charge-offs		(78)		(72)		—		(150)		(530)		(456)		(14)		(231)		(1,531)
Recoveries		1		—		—		20		262		312		—		9		604
Provision (benefit)		77		72		—		130		268		144		14		222		927
Balance, December 31, 2014	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		24,099		49,476		62,065		646,375		234,949		41,130		65,139		204,766		1,327,999
Total acquired non-credit impaired loans	$	24,099	$	49,476	$	62,065	$	646,375	$	234,949	$	41,130	$	65,139	$	204,766	$	1,327,999

As of December 31, 2013 the Company had not recorded any allowance for loan losses for loans acquired and accounted for under FASB ASC Topic 310‑20.

The following tables present a disaggregated analysis of activity in the allowance for loan losses and loan balances for acquired credit impaired loans:


	Commercial				Commercial
	Loans Greater				Real Estate-
	Than or Equal		Commercial		Construction and		Residential				Commercial
(Dollars in thousands)	to $1 Million-CBT		Real Estate		Development		Real Estate		Consumer		and Industrial		Single Pay		Total
Year Ended December 31, 2015:
Allowance for loan losses:
Balance, December 31, 2014	$	135	$	1,444	$	336	$	4,387	$	275	$	718	$	70	$	7,365
Provision for loan losses before benefit attributable to FDIC loss share agreements		(43)		(456)		(68)		99		336		(118)		(2)		(252)
Benefit attributable to FDIC loss share agreements		—		459		74		228		(107)		131		1		786
Total provision for loan losses charged to operations		(43)		3		6		327		229		13		(1)		534
Provision for loan losses recorded through the FDIC loss share receivable		—		(459)		(74)		(228)		107		(131)		(1)		(786)
Reduction due to loan removals		(92)		(932)		(91)		(1,500)		(298)		(426)		(68)		(3,407)
Balance, December 31, 2015	$	—	$	56	$	177	$	2,986	$	313	$	174	$	—	$	3,706
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	—	$	56	$	177	$	2,986	$	313	$	174	$	—	$	3,706
Loans:*
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		12,628		255,430		54,272		313,319		70,734		31,193		—		737,576
Total acquired credit impaired loans	$	12,628	$	255,430	$	54,272	$	313,319	$	70,734	$	31,193	$	—	$	737,576
Year Ended December 31, 2014:
Allowance for loan losses:
Balance, December 31, 2013	$	303	$	1,816	$	2,244	$	5,132	$	538	$	1,481	$	104	$	11,618
Provision for loan losses before benefit attributable to FDIC loss share agreements		(129)		(328)		(621)		(406)		(111)		(314)		2		(1,907)
Benefit attributable to FDIC loss share agreements		183		364		792		571		141		371		(2)		2,420
Total provision for loan losses charged to operations		54		36		171		165		30		57		—		513
Provision for loan losses recorded through the FDIC loss share receivable		(183)		(364)		(792)		(571)		(141)		(371)		2		(2,420)
Reduction due to loan removals		(39)		(44)		(1,287)		(339)		(152)		(449)		(36)		(2,346)
Balance, December 31, 2014	$	135	$	1,444	$	336	$	4,387	$	275	$	718	$	70	$	7,365
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	135	$	1,444	$	336	$	4,387	$	275	$	718	$	70	$	7,365
Loans:*
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		15,813		325,109		65,262		390,244		85,449		44,804		86		926,767
Total acquired credit impaired loans	$	15,813	$	325,109	$	65,262	$	390,244	$	85,449	$	44,804	$	86	$	926,767
Year Ended December 31, 2013:
Allowance for loan losses:
Balance, December 31, 2012	$	5,337	$	1,517	$	1,628	$	4,207	$	96	$	4,139	$	294	$	17,218
Provision for loan losses before benefit attributable to FDIC loss share agreements		(3,109)		299		2,347		1,057		442		(1,786)		(168)		(918)
Benefit attributable to FDIC loss share agreements		2,934		(456)		(1,645)		(520)		(412)		1,719		166		1,786
Total provision for loan losses charged to operations		(175)		(157)		702		537		30		(67)		(2)		868
Provision for loan losses recorded through the FDIC loss share receivable		(2,934)		456		1,645		520		412		(1,719)		(166)		(1,786)
Reduction due to loan removals		(1,925)		—		(1,731)		(132)		—		(872)		(22)		(4,682)
Balance, December 31, 2013	$	303	$	1,816	$	2,244	$	5,132	$	538	$	1,481	$	104	$	11,618
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	303	$	1,816	$	2,244	$	5,132	$	538	$	1,481	$	104	$	11,618
Loans:*
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		24,109		439,785		114,126		481,247		103,998		68,862		129		1,232,256
Total acquired credit impaired loans	$	24,109	$	439,785	$	114,126	$	481,247	$	103,998	$	68,862	$	129	$	1,232,256

*—The carrying value of acquired credit impaired loans includes a non‑accretable difference which is primarily associated with the assessment of credit quality of acquired loans.

As part of the on‑going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the level of classified loans, (ii) net charge‑offs, (iii) non‑performing loans (see details below) and (iv) the general economic conditions of the markets that we serve.

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. A description of the general characteristics of the risk grades is as follows:

Pass—These loans range from minimal credit risk to average however still acceptable credit risk.

Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well‑defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

The following table presents the credit risk profile by risk grade of commercial non‑acquired loans:


	Construction & Development				Commercial Non-owner Occupied				Commercial Owner Occupied
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
(Dollars in thousands)	2015		2014		2015		2014		2015		2014
Pass	$	382,167	$	337,641	$	471,466	$	307,450	$	994,442	$	858,220
Special mention		13,633		15,466		13,912		20,596		29,478		34,737
Substandard		6,179		11,114		2,399		5,544		9,478		14,956
Doubtful		—		—		—		—		—		—
	$	401,979	$	364,221	$	487,777	$	333,590	$	1,033,398	$	907,913


	Commercial & Industrial				Other Income Producing Property				Commercial Total
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2015		2014		2015		2014		2015		2014
Pass	$	497,572	$	397,555	$	163,975	$	135,400	$	2,509,622	$	2,036,266
Special mention		4,472		6,718		8,047		10,333		69,542		87,850
Substandard		1,764		1,650		3,826		5,195		23,646		38,459
Doubtful		—		—		—		—		—		—
	$	503,808	$	405,923	$	175,848	$	150,928	$	2,602,810	$	2,162,575

The following table presents the credit risk profile by risk grade of consumer non‑acquired loans:


	Consumer Owner Occupied				Home Equity				Consumer
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
(Dollars in thousands)	2015		2014		2015		2014		2015		2014
Pass	$	984,780	$	746,847	$	304,744	$	269,844	$	231,294	$	188,049
Special mention		17,777		22,129		8,171		8,047		771		764
Substandard		16,427		17,802		6,318		6,021		1,039		504
Doubtful		—		—		22		22		—		—
	$	1,018,984	$	786,778	$	319,255	$	283,934	$	233,104	$	189,317


	Other				Consumer Total
	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Pass	$	46,573	$	45,222	$	1,567,391	$	1,249,962
Special mention		—		—		26,719		30,940
Substandard		—		—		23,784		24,327
Doubtful		—		—		22		22
	$	46,573	$	45,222	$	1,617,916	$	1,305,251

The following table presents the credit risk profile by risk grade of total non‑acquired loans:


	Total Non-acquired Loans
	December 31,		December 31,
(Dollars in thousands)	2015		2014
Pass	$	4,077,013	$	3,286,228
Special mention		96,261		118,790
Substandard		47,430		62,786
Doubtful		22		22
	$	4,220,726	$	3,467,826

At December 31, 2015, the aggregate amount of non‑acquired substandard and doubtful loans totaled $47.5 million. When these loans are combined with non‑acquired OREO of $8.7 million, our non‑acquired classified assets (as defined by the South Carolina Board of Financial Institutions and the FDIC, our primary regulators) were $56.2 million. At December 31, 2014, the amounts were $62.8 million, $7.9 million, and $70.7 million, respectively.

The following table presents the credit risk profile by risk grade of commercial loans for acquired non‑credit impaired loans:


					Commercial Non-owner
	Construction & Development				Occupied				Commercial Owner Occupied
	December 31,				December 31,				December 31,
(Dollars in thousands)	2015		2014		2015		2014		2015		2014
Pass	$	12,935	$	22,456	$	33,485	$	42,572	$	38,623	$	61,040
Special mention		109		816		637		6,039		377		265
Substandard		805		827		5,981		865		220		760
Doubtful		—		—		—		—		—		—
	$	13,849	$	24,099	$	40,103	$	49,476	$	39,220	$	62,065


					Other Income Producing
	Commercial & Industrial				Property				Commercial Total
	December 31,				December 31,				December 31,
	2015		2014		2015		2014		2015		2014
Pass	$	24,621	$	39,780	$	49,783	$	63,090	$	159,447	$	228,938
Special mention		166		448		592		896		1,881		8,464
Substandard		688		902		794		1,153		8,488		4,507
Doubtful		—		—		—		—		—		—
	$	25,475	$	41,130	$	51,169	$	65,139	$	169,816	$	241,909

The following table presents the credit risk profile by risk grade of consumer loans for acquired non‑credit impaired loans:


	Consumer Owner Occupied				Home Equity				Consumer
	December 31,				December 31,				December 31,
(Dollars in thousands)	2015		2014		2015		2014		2015		2014
Pass	$	514,817	$	639,555	$	180,472	$	222,653	$	167,399	$	201,636
Special mention		557		1,241		4,202		4,491		729		619
Substandard		2,733		5,579		6,294		7,805		2,519		2,511
Doubtful		—		—		—		—		—		—
	$	518,107	$	646,375	$	190,968	$	234,949	$	170,647	$	204,766


	Consumer Total
	December 31,
	2015		2014
Pass	$	862,688	$	1,063,844
Special mention		5,488		6,351
Substandard		11,546		15,895
Doubtful		—		—
	$	879,722	$	1,086,090

The following table presents the credit risk profile by risk grade of total acquired non-credit impaired loans:


	Total Acquired
	Non-credit Impaired Loans
	December 31,
(Dollars in thousands)	2015		2014
Pass	$	1,022,135	$	1,292,782
Special mention		7,369		14,815
Substandard		20,034		20,402
Doubtful		—		—
	$	1,049,538	$	1,327,999

The following table presents the credit risk profile by risk grade of acquired credit impaired loans (identified as credit‑impaired at the time of acquisition), net of the related discount (this table should be read in conjunction with the allowance for acquired loan losses table found on page F‑34):


	Commercial Loans Greater								Commercial Real Estate—
	Than or Equal to								Construction and
	$1 million-CBT				Commercial Real Estate				Development
	December 31,				December 31,				December 31,
(Dollars in thousands)	2015		2014		2015		2014		2015		2014
Pass	$	11,238	$	11,248	$	177,656	$	208,269	$	26,308	$	26,855
Special mention		1,018		1,030		37,607		35,896		14,532		9,539
Substandard		372		3,535		40,167		80,944		13,432		28,868
Doubtful		—		—		—		—		—		—
	$	12,628	$	15,813	$	255,430	$	325,109	$	54,272	$	65,262


		Residential Real Estate				Consumer				Commercial & Industrial
		December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
		2015		2014		2015		2014		2015		2014
Pass	$		166,309	$	190,931	$	10,703	$	7,493	$	22,358	$	25,530
Special mention			63,341		73,699		23,331		29,087		2,549		5,317
Substandard			83,669		125,614		36,700		48,869		6,286		13,957
Doubtful			—		—		—		—		—		—
	$		313,319	$	390,244	$	70,734	$	85,449	$	31,193	$	44,804


					Total Acquired
	Single Pay				Credit Impaired Loans
	December 31,				December 31,
	2015		2014		2015		2014
Pass	$	—	$	58	$	414,572	$	470,384
Special mention		—		—		142,378		154,568
Substandard		—		28		180,626		301,815
Doubtful		—		—		—		—
	$	—	$	86	$	737,576	$	926,767

The risk grading of acquired credit impaired loans is determined utilizing a loan’s contractual balance, while the amount recorded in the financial statements and reflected above is the carrying value. In an FDIC‑assisted acquisition, covered acquired loans are initially recorded at their fair value, including a credit discount due to the high concentration of substandard and doubtful loans. In addition to the credit discount and the allowance for loan losses on covered acquired loans, the Company’s risk of loss is mitigated by the FDIC loss share arrangement.

The following table presents an aging analysis of past due loans, segregated by class for non‑acquired loans:


	30 - 59 Days		60 - 89 Days		90+ Days		Total				Total
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
December 31, 2015
Commercial real estate:
Construction and land development	$	323	$	136	$	915	$	1,374	$	400,605	$	401,979
Commercial non-owner occupied		867		—		184		1,051		486,726		487,777
Commercial owner occupied		1,269		608		1,530		3,407		1,029,991		1,033,398
Consumer real estate:
Consumer owner occupied		1,503		308		3,149		4,960		1,014,024		1,018,984
Home equity loans		899		1,046		598		2,543		316,712		319,255
Commercial and industrial		173		166		234		573		503,235		503,808
Other income producing property		241		207		275		723		175,125		175,848
Consumer		351		136		395		882		232,222		233,104
Other loans		48		43		64		155		46,418		46,573
	$	5,674	$	2,650	$	7,344	$	15,668	$	4,205,058	$	4,220,726
December 31, 2014
Commercial real estate:
Construction and land development	$	318	$	439	$	1,354	$	2,111	$	362,110	$	364,221
Commercial non-owner occupied		1,197		—		1,432		2,629		330,961		333,590
Commercial owner occupied		1,106		95		5,403		6,604		901,309		907,913
Consumer real estate:
Consumer owner occupied		1,946		501		2,746		5,193		781,585		786,778
Home equity loans		679		443		519		1,641		282,293		283,934
Commercial and industrial		760		123		107		990		404,933		405,923
Other income producing property		570		114		1,319		2,003		148,925		150,928
Consumer		512		243		120		875		188,442		189,317
Other loans		65		46		62		173		45,049		45,222
	$	7,153	$	2,004	$	13,062	$	22,219	$	3,445,607	$	3,467,826

The following table presents an aging analysis of past due loans, segregated by class for acquired non‑credit impaired loans:


	30 - 59 Days		60 - 89 Days		90+ Days		Total				Total
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
December 31, 2015
Commercial real estate:
Construction and land development	$	—	$	21	$	48	$	69	$	13,780	$	13,849
Commercial non-owner occupied		—		—		—		—		40,103		40,103
Commercial owner occupied		120		176		44		340		38,880		39,220
Consumer real estate:
Consumer owner occupied		694		4		688		1,386		516,721		518,107
Home equity loans		897		412		482		1,791		189,177		190,968
Commercial and industrial		1		1		5		7		25,468		25,475
Other income producing property		—		—		7		7		51,162		51,169
Consumer		257		270		797		1,324		169,323		170,647
	$	1,969	$	884	$	2,071	$	4,924	$	1,044,614	$	1,049,538
December 31, 2014
Commercial real estate:
Construction and land development	$	17	$	—	$	40	$	57	$	24,042	$	24,099
Commercial non-owner occupied		—		—		—		—		49,476		49,476
Commercial owner occupied		414		—		38		452		61,613		62,065
Consumer real estate:
Consumer owner occupied		443		241		1,566		2,250		644,125		646,375
Home equity loans		1,451		866		972		3,289		231,660		234,949
Commercial and industrial		14		250		117		381		40,749		41,130
Other income producing property		97		—		88		185		64,954		65,139
Consumer		885		341		843		2,069		202,697		204,766
	$	3,321	$	1,698	$	3,664	$	8,683	$	1,319,316	$	1,327,999

The following table presents an aging analysis of past due loans, segregated by class for acquired credit impaired loans:


	30 - 59 Days		60 - 89 Days		90+ Days		Total				Total
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Loans
December 31, 2015
Commercial loans greater than or equal to $1 million-CBT	$	—	$	—	$	—	$	—	$	12,628	$	12,628
Commercial real estate		1,118		426		5,624		7,168		248,262		255,430
Commercial real estate—construction and development		784		367		2,162		3,313		50,959		54,272
Residential real estate		4,705		1,155		8,095		13,955		299,364		313,319
Consumer		1,756		380		2,085		4,221		66,513		70,734
Commercial and industrial		272		137		846		1,255		29,938		31,193
Single pay		—		—		—		—		—		—
	$	8,635	$	2,465	$	18,812	$	29,912	$	707,664	$	737,576
December 31, 2014
Commercial loans greater than or equal to $1 million-CBT	$	—	$	—	$	2,896	$	2,896	$	12,917	$	15,813
Commercial real estate		4,350		723		15,866		20,939		304,170		325,109
Commercial real estate—construction and development		1,750		452		8,204		10,406		54,856		65,262
Residential real estate		7,194		2,856		15,471		25,521		364,723		390,244
Consumer		2,241		1,106		2,614		5,961		79,488		85,449
Commercial and industrial		451		196		3,413		4,060		40,744		44,804
Single pay		—		—		—		—		86		86
	$	15,986	$	5,333	$	48,464	$	69,783	$	856,984	$	926,767

The following is a summary of information pertaining to impaired non‑acquired and acquired loans accounted for under FASB ASC Topic 310‑20:


	Unpaid		Recorded		Gross
	Contractual		Investment		Recorded		Total
	Principal		With No		Investment		Recorded		Related
(Dollars in thousands)	Balance		Allowance		With Allowance		Investment		Allowance
December 31, 2015
Commercial real estate:
Construction and land development	$	9,931	$	1,004	$	5,276	$	6,280	$	615
Commercial non-owner occupied		2,909		233		1,219		1,452		34
Commercial owner occupied		11,516		4,134		3,591		7,725		101
Consumer real estate:
Consumer owner occupied		9,001		3,505		4,044		7,549		138
Home equity loans		483		186		123		309		3
Commercial and industrial		2,641		273		1,214		1,487		279
Other income producing property		5,763		112		4,779		4,891		422
Consumer		155		—		102		102		3
Other loans		611		—		423		423		12
Total	$	43,010	$	9,447	$	20,771	$	30,218	$	1,607
December 31, 2014
Commercial real estate:
Construction and land development	$	7,414	$	1,528	$	3,324	$	4,852	$	475
Commercial non-owner occupied		4,920		2,539		1,071		3,610		77
Commercial owner occupied		12,508		5,546		3,614		9,160		172
Consumer real estate:
Consumer owner occupied		3,393		—		2,966		2,966		144
Home equity loans		131		—		31		31		1
Commercial and industrial		1,625		336		572		908		41
Other income producing property		6,280		360		5,138		5,498		646
Consumer		95		—		60		60		2
Total	$	36,366	$	10,309	$	16,776	$	27,085	$	1,558

Acquired credit impaired loans are accounted for in pools as shown on page F‑28 rather than being individually evaluated for impairment; therefore, the table above excludes acquired credit impaired loans.

The following summarizes the average investment in impaired loans, non‑acquired and acquired loans accounted for under FASB ASC Topic 310‑20, and interest income recognized on these loans:


	Year Ended December 31,
	2015				2014				2013
	Average				Average				Average
	Investment in		Interest Income		Investment in		Interest Income		Investment in		Interest Income
(Dollars in thousands)	Impaired Loans		Recognized		Impaired Loans		Recognized		Impaired Loans		Recognized
Commercial real estate:
Construction and land development	$	5,566	$	263	$	5,295	$	80	$	10,589	$	98
Commercial non-owner occupied		2,531		66		3,145		68		4,030		—
Commercial owner occupied		8,442		368		10,360		141		15,170		106
Consumer real estate:
Consumer owner occupied		5,257		183		2,990		113		845		154
Home equity loans		170		10		15		1		—		—
Commercial and industrial		1,198		61		657		27		1,234		—
Other income producing property		5,195		245		4,073		163		3,463		35
Consumer		81		4		30		5		—		—
Other loans		211		16		—		—		—		—
Total Impaired Loans	$	28,651	$	1,216	$	26,565	$	598	$	35,331	$	393

The following is a summary of information pertaining to non‑acquired nonaccrual loans by class, including restructured loans:


	December 31,
(Dollars in thousands)	2015		2014
Commercial non-owner occupied real estate:
Construction and land development	$	1,090	$	2,920
Commercial non-owner occupied		184		2,325
Total commercial non-owner occupied real estate		1,274		5,245
Consumer real estate:
Consumer owner occupied		7,766		6,015
Home equity loans		1,769		1,412
Total consumer real estate		9,535		7,427
Commercial owner occupied real estate		3,056		3,605
Commercial and industrial		515		600
Other income producing property		746		1,348
Consumer		659		344
Other loans		—		—
Restructured loans		2,662		9,425
Total loans on nonaccrual status	$	18,447	$	27,994

The following is a summary of information pertaining to acquired non-credit impaired nonaccrual loans by class, including restructured loans:


	December 31,
(Dollars in thousands)	2015		2014
Commercial non-owner occupied real estate:
Construction and land development	$	37	$	41
Commercial non-owner occupied		0		645
Total commercial non-owner occupied real estate		37		686
Consumer real estate:
Consumer owner occupied		976		3,685
Home equity loans		1,103		1,507
Total consumer real estate		2,079		5,192
Commercial owner occupied real estate		44		38
Commercial and industrial		1		120
Other income producing property		168		309
Consumer		1,435		1,193
Total loans on nonaccrual status	$	3,764	$	7,538

In the course of resolving delinquent loans, the Bank may choose to restructure the contractual terms of certain loans. Any loans that are modified are reviewed by the Bank to determine if a troubled debt restructuring (“TDR” or “restructured loan”) has occurred. A TDR is a modification in which the Bank grants a concession to a borrower that it would not otherwise consider due to economic or legal reasons related to a borrower’s financial difficulties. The concessions granted on TDRs generally include terms to reduce the interest rate, extend the term of the debt obligation, or modify the payment structure on the debt obligation.

The Bank designates loan modifications as TDRs when it grants a concession to the borrower that it would not otherwise consider due to the borrower experiencing financial difficulty (FASB ASC Topic 310‑40). Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of concession are initially classified as accruing TDRs if the note is reasonably assured of repayment and performance is expected in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the concession date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accruing status when there is economic substance to the restructuring, there is documented credit evaluation of the borrower’s financial condition, the remaining balance is reasonably assured of repayment in accordance with its modified terms, and the borrower has demonstrated sustained repayment performance in accordance with the modified terms for a reasonable period of time (generally a minimum of six months). For the twelve months ended December 31, 2015 and 2014, the Company’s TDRs were not material.