Note 4 - Loans and Allowance for Loan Losses

The following is a summary of non‑acquired loans:


	December 31,
(Dollars in thousands)	2016		2015
Non-acquired loans:
Commercial non-owner occupied real estate:
Construction and land development	$	580,464	$	401,979
Commercial non-owner occupied		714,715		487,777
Total commercial non-owner occupied real estate		1,295,179		889,756
Consumer real estate:
Consumer owner occupied		1,197,621		1,018,984
Home equity loans		383,218		319,255
Total consumer real estate		1,580,839		1,338,239
Commercial owner occupied real estate		1,177,745		1,033,398
Commercial and industrial		671,398		503,808
Other income producing property		178,238		175,848
Consumer		324,238		233,104
Other loans		13,404		46,573
Total non-acquired loans		5,241,041		4,220,726
Less allowance for loan losses		(36,960)		(34,090)
Non-acquired loans, net	$	5,204,081	$	4,186,636

The above table includes deferred fees, net of deferred costs, totaling $341,000 and $1.2 million at December 31, 2016 and 2015, 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)	2016		2015
FASB ASC Topic 310-20 acquired loans:
Commercial non-owner occupied real estate:
Construction and land development	$	10,090	$	13,849
Commercial non-owner occupied		34,628		40,103
Total commercial non-owner occupied real estate		44,718		53,952
Consumer real estate:
Consumer owner occupied		408,270		518,107
Home equity loans		160,879		190,968
Total consumer real estate		569,149		709,075
Commercial owner occupied real estate		27,195		39,220
Commercial and industrial		13,641		25,475
Other income producing property		39,342		51,169
Consumer		142,654		170,647
Total FASB ASC Topic 310-20 acquired loans	$	836,699	$	1,049,538

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)	2016		2015
FASB ASC Topic 310-30 acquired loans:
Commercial loans greater than or equal to $1 million-CBT	$	8,617	$	12,628
Commercial real estate		210,204		255,430
Commercial real estate—construction and development		44,373		54,272
Residential real estate		258,100		313,319
Consumer		59,300		70,734
Commercial and industrial		25,347		31,193
Single pay		—		—
Total FASB ASC Topic 310-30 acquired loans		605,941		737,576
Less allowance for loan losses		(3,395)		(3,706)
FASB ASC Topic 310-30 acquired loans, net	$	602,546	$	733,870

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, 2016 and 2015 are as follows:


	December 31,
(Dollars in thousands)	2016		2015
Contractual principal and interest	$	778,822	$	968,857
Non-accretable difference		(17,502)		(29,743)
Cash flows expected to be collected		761,320		939,114
Accretable yield		(155,379)		(201,538)
Carrying value	$	605,941	$	737,576
Allowance for acquired loan losses	$	(3,395)	$	(3,706)

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)	2016		2015		2014
Balance at beginning of period	$	733,870	$	919,402	$	1,220,638
Net reductions for payments, foreclosures, and accretion		(131,635)		(189,191)		(299,329)
Change in the allowance for loan losses on acquired loans		311		3,659		(1,907)
Balance at end of period, net of allowance for loan losses on acquired loans	$	602,546	$	733,870	$	919,402

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


	Year Ended December 31,
(Dollars in thousands)	2016		2015		2014
Balance at beginning of period	$	201,538	$	306,826	$	301,516
Accretion		(72,757)		(97,847)		(105,254)
Reclass of nonaccretable difference due to improvement in expected cash flows		25,808		61,985		112,316
Other changes, net		790		(69,426)		(1,752)
Balance at end of period	$	155,379	$	201,538	$	306,826

In 2016, the accretable yield balance declined by $46.2 million as loan accretion (income) of $72.8 million was recognized. This was partially offset by improved expected cash flows of $25.8 million.

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 (the Company anticipates receiving the cash sooner than previously expected).

Our loan loss policy adheres to generally accepted accounting principles in the United States as well as 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 were 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. Prior to the termination of our loss share agreements in June 2016, offsetting the impact of the provision established for acquired loans covered under FDIC loss share agreements, the receivable from the FDIC was 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.)

On June 23, 2016, the Bank entered into an early termination agreement with the FDIC with respect to all of its outstanding loss share agreements. The loss share agreements were entered into with the FDIC in 2009, 2010, 2011 and 2012 either by the Bank or by First Federal Bank, acquired by the Bank in July of 2013. As a result of the termination agreement, all assets previously classified as covered became uncovered effective June 23, 2016, and as a result the Bank will now recognize the full amount of future charge-offs, recoveries, gains, losses, and expenses related to these previously covered assets, as the FDIC will no longer share in these amounts.

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, 2016:
Balance at beginning of period	$	34,090	$	—	$	3,706	$	37,796
Loans charged-off		(5,902)		(987)		—		(6,889)
Recoveries of loans previously charged off		3,233		318		—		3,551
Net charge-offs		(2,669)		(669)		—		(3,338)
Provision for loan losses		5,539		669		588		6,796
Benefit attributable to FDIC loss share agreements		—		—		23		23
Total provision for loan losses charged to operations		5,539		669		611		6,819
Provision for loan losses recorded through the FDIC loss share receivable		—		—		(23)		(23)
Reduction due to loan removals		—		—		(899)		(899)
Balance at end of period	$	36,960	$	—	$	3,395	$	40,355
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

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, 2016:
Allowance for loan losses:
Balance at beginning of period	$	4,116	$	3,568	$	8,341	$	7,212	$	2,929	$	3,974	$	1,963	$	1,694	$	293	$	34,090
Charge-offs		(159)		(111)		(118)		(226)		(808)		(876)		(7)		(3,597)		—		(5,902)
Recoveries		912		512		54		134		299		292		87		943		—		3,233
Provision (benefit)		(778)		1,011		(255)		700		791		1,452		(501)		3,310		(191)		5,539
Balance at end of period	$	4,091	$	4,980	$	8,022	$	7,820	$	3,211	$	4,842	$	1,542	$	2,350	$	102	$	36,960
Loans individually evaluated for impairment	$	348	$	170	$	67	$	80	$	40	$	386	$	242	$	4	$	—	$	1,337
Loans collectively evaluated for impairment	$	3,743	$	4,810	$	7,955	$	7,740	$	3,171	$	4,456	$	1,300	$	2,346	$	102	$	35,623
Loans:
Loans individually evaluated for impairment	$	3,033	$	806	$	6,245	$	5,673	$	1,674	$	1,263	$	2,372	$	145	$	—	$	21,211
Loans collectively evaluated for impairment		577,431		713,909		1,171,500		1,191,948		381,544		670,135		175,866		324,093		13,404		5,219,830
Total non-acquired loans	$	580,464	$	714,715	$	1,177,745	$	1,197,621	$	383,218	$	671,398	$	178,238	$	324,238	$	13,404	$	5,241,041
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		(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

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, 2016
Allowance for loan losses:
Balance at beginning of period	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Charge-offs		—		—		39		—		(428)		(66)		—		(532)		(987)
Recoveries		4		—		—		12		199		9		43		51		318
Provision (benefit)		(4)		—		(39)		(12)		229		57		(43)		481		669
Balance, December 31, 2016	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

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

Loans:
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		10,090		34,628		27,195		408,270		160,879		13,641		39,342		142,654		836,699
Total acquired non-credit impaired loans	$	10,090	$	34,628	$	27,195	$	408,270	$	160,879	$	13,641	$	39,342	$	142,654	$	836,699

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

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, 2016:
Allowance for loan losses:
Balance, December 31, 2015	$	—	$	56	$	177	$	2,986	$	313	$	174	$	—	$	3,706
Provision for loan losses before benefit attributable to FDIC loss share agreements		—		1		—		(129)		533		183		—		588
Benefit attributable to FDIC loss share agreements		—		—		—		23		—		—		—		23
Total provision for loan losses charged to operations		—		1		—		(106)		533		183		—		611
Provision for loan losses recorded through the FDIC loss share receivable		—		—		—		(23)		—		—		—		(23)
Reduction due to loan removals		—		(16)		(38)		(438)		(288)		(119)		—		(899)
Balance, December 31, 2016	$	—	$	41	$	139	$	2,419	$	558	$	238	$	—	$	3,395
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment	$	—	$	41	$	139	$	2,419	$	558	$	238	$	—	$	3,395
Loans:*
Loans individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Loans collectively evaluated for impairment		8,617		210,204		44,373		258,100		59,300		25,347		—		605,941
Total acquired credit impaired loans	$	8,617	$	210,204	$	44,373	$	258,100	$	59,300	$	25,347	$	—	$	605,941
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

*—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)	2016		2015		2016		2015		2016		2015
Pass	$	567,398	$	382,167	$	701,150	$	471,466	$	1,149,417	$	994,442
Special mention		8,421		13,633		11,434		13,912		22,133		29,478
Substandard		4,645		6,179		2,131		2,399		6,195		9,478
Doubtful		—		—		—		—		—		—
	$	580,464	$	401,979	$	714,715	$	487,777	$	1,177,745	$	1,033,398


	Commercial & Industrial				Other Income Producing Property				Commercial Total
	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2016		2015		2016		2015		2016		2015
Pass	$	655,157	$	497,572	$	167,025	$	163,975	$	3,240,147	$	2,509,622
Special mention		14,325		4,472		9,280		8,047		65,593		69,542
Substandard		1,916		1,764		1,933		3,826		16,820		23,646
Doubtful		—		—		—		—		—		—
	$	671,398	$	503,808	$	178,238	$	175,848	$	3,322,560	$	2,602,810

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)	2016		2015		2016		2015		2016		2015
Pass	$	1,167,768	$	984,780	$	368,655	$	304,744	$	322,654	$	231,294
Special mention		15,283		17,777		8,145		8,171		468		771
Substandard		14,570		16,427		6,418		6,318		1,116		1,039
Doubtful		—		—		—		22		—		—
	$	1,197,621	$	1,018,984	$	383,218	$	319,255	$	324,238	$	233,104


	Other				Consumer Total
	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Pass	$	13,404	$	46,573	$	1,872,481	$	1,567,391
Special mention		—		—		23,896		26,719
Substandard		—		—		22,104		23,784
Doubtful		—		—		—		22
	$	13,404	$	46,573	$	1,918,481	$	1,617,916

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)	2016		2015
Pass	$	5,112,628	$	4,077,013
Special mention		89,489		96,261
Substandard		38,924		47,430
Doubtful		—		22
	$	5,241,041	$	4,220,726

At December 31, 2016, the aggregate amount of non‑acquired substandard and doubtful loans totaled $38.9 million. When these loans are combined with non‑acquired OREO of $3.9 million, our non‑acquired classified assets (as defined by the South Carolina Board of Financial Institutions and the FDIC, our primary regulators) were $42.8 million. At December 31, 2015, the amounts were $47.5 million, $8.7 million, and $56.2 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)	2016		2015		2016		2015		2016		2015
Pass	$	8,997	$	12,935	$	28,368	$	33,485	$	26,920	$	38,623
Special mention		253		109		6,171		637		—		377
Substandard		840		805		89		5,981		275		220
Doubtful		—		—		—		—		—		—
	$	10,090	$	13,849	$	34,628	$	40,103	$	27,195	$	39,220


					Other Income Producing
	Commercial & Industrial				Property				Commercial Total
	December 31,				December 31,				December 31,
	2016		2015		2016		2015		2016		2015
Pass	$	13,475	$	24,621	$	38,361	$	49,783	$	116,121	$	159,447
Special mention		117		166		273		592		6,814		1,881
Substandard		49		688		708		794		1,961		8,488
Doubtful		—		—		—		—		—		—
	$	13,641	$	25,475	$	39,342	$	51,169	$	124,896	$	169,816

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)	2016		2015		2016		2015		2016		2015
Pass	$	404,761	$	514,817	$	151,752	$	180,472	$	139,686	$	167,399
Special mention		1,326		557		4,113		4,202		1,102		729
Substandard		2,183		2,733		5,014		6,294		1,866		2,519
Doubtful		—		—		—		—		—		—
	$	408,270	$	518,107	$	160,879	$	190,968	$	142,654	$	170,647


	Consumer Total
	December 31,
	2016		2015
Pass	$	696,199	$	862,688
Special mention		6,541		5,488
Substandard		9,063		11,546
Doubtful		—		—
	$	711,803	$	879,722

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)	2016		2015
Pass	$	812,320	$	1,022,135
Special mention		13,355		7,369
Substandard		11,024		20,034
Doubtful		—		—
	$	836,699	$	1,049,538

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)	2016		2015		2016		2015		2016		2015
Pass	$	8,297	$	11,238	$	162,870	$	177,656	$	21,150	$	26,308
Special mention		—		1,018		26,238		37,607		12,643		14,532
Substandard		320		372		21,096		40,167		10,580		13,432
Doubtful		—		—		—		—		—		—
	$	8,617	$	12,628	$	210,204	$	255,430	$	44,373	$	54,272


	Residential Real Estate				Consumer				Commercial & Industrial
	December 31,				December 31,				December 31,
	2016		2015		2016		2015		2016		2015
Pass	$	138,343	$	166,309	$	8,513	$	10,703	$	17,371	$	22,358
Special mention		52,546		63,341		19,685		23,331		4,614		2,549
Substandard		67,211		83,669		31,102		36,700		3,362		6,286
Doubtful		—		—		—		—		—		—
	$	258,100	$	313,319	$	59,300	$	70,734	$	25,347	$	31,193


					Total Acquired
	Single Pay				Credit Impaired Loans
	December 31,				December 31,
	2016		2015		2016		2015
Pass	$	—	$	—	$	356,544	$	414,572
Special mention		—		—		115,726		142,378
Substandard		—		—		133,671		180,626
Doubtful		—		—		—		—
	$	—	$	—	$	605,941	$	737,576

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 a 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. Note that all covered acquired loans are now uncovered due to the early termination agreement with the FDIC on June 23, 2016.

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, 2016
Commercial real estate:
Construction and land development	$	256	$	313	$	1,026	$	1,595	$	578,869	$	580,464
Commercial non-owner occupied		647		232		137		1,016		713,699		714,715
Commercial owner occupied		1,272		957		1,478		3,707		1,174,038		1,177,745
Consumer real estate:
Consumer owner occupied		1,473		246		1,454		3,173		1,194,448		1,197,621
Home equity loans		566		889		838		2,293		380,925		383,218
Commercial and industrial		1,033		216		345		1,594		669,804		671,398
Other income producing property		310		94		147		551		177,687		178,238
Consumer		666		355		395		1,416		322,822		324,238
Other loans		—		—		—		—		13,404		13,404
	$	6,223	$	3,302	$	5,820	$	15,345	$	5,225,696	$	5,241,041
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

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, 2016
Commercial real estate:
Construction and land development	$	4	$	—	$	160	$	164	$	9,926	$	10,090
Commercial non-owner occupied		—		—		—		—		34,628		34,628
Commercial owner occupied		—		—		106		106		27,089		27,195
Consumer real estate:
Consumer owner occupied		330		113		256		699		407,571		408,270
Home equity loans		476		941		741		2,158		158,721		160,879
Commercial and industrial		2		—		—		2		13,639		13,641
Other income producing property		131		1		—		132		39,210		39,342
Consumer		437		210		576		1,223		141,431		142,654
	$	1,380	$	1,265	$	1,839	$	4,484	$	832,215	$	836,699
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

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, 2016
Commercial loans greater than or equal to $1 million-CBT	$	—	$	—	$	—	$	—	$	8,617	$	8,617
Commercial real estate		573		357		2,667		3,597		206,607		210,204
Commercial real estate—construction and development		168		489		3,612		4,269		40,104		44,373
Residential real estate		4,688		1,105		6,777		12,570		245,530		258,100
Consumer		1,412		381		1,231		3,024		56,276		59,300
Commercial and industrial		46		24		536		606		24,741		25,347
Single pay		—		—		—		—		—		—
	$	6,887	$	2,356	$	14,823	$	24,066	$	581,875	$	605,941
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

The following is a summary of information pertaining to impaired non‑acquired loans:


	Unpaid		Recorded		Gross
	Contractual		Investment		Recorded		Total
	Principal		With No		Investment		Recorded		Related
(Dollars in thousands)	Balance		Allowance		With Allowance		Investment		Allowance
December 31, 2016
Commercial real estate:
Construction and land development	$	7,394	$	1,074	$	1,959	$	3,033	$	348
Commercial non-owner occupied		2,417		223		583		806		170
Commercial owner occupied		10,118		3,976		2,269		6,245		67
Consumer real estate:
Consumer owner occupied		7,090		2,120		3,553		5,673		80
Home equity loans		2,165		244		1,430		1,674		40
Commercial and industrial		2,335		—		1,263		1,263		386
Other income producing property		3,166		99		2,273		2,372		242
Consumer		394		—		145		145		4
Other loans		—		—		—		—		—
Total	$	35,079	$	7,736	$	13,475	$	21,211	$	1,337
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

Acquired credit impaired loans are accounted for in pools as shown on page F‑29 rather than being individually evaluated for impairment; therefore, the table above excludes acquired credit impaired loans.

The following summarizes the average investment in impaired non‑acquired loans, and interest income recognized on these loans:


	Year Ended December 31,
	2016				2015				2014
	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	$	4,657	$	120	$	5,566	$	263	$	5,295	$	80
Commercial non-owner occupied		1,129		32		2,531		66		3,145		68
Commercial owner occupied		6,985		291		8,442		368		10,360		141
Consumer real estate:
Consumer owner occupied		6,611		206		5,257		183		2,990		113
Home equity loans		992		61		170		10		15		1
Commercial and industrial		1,375		52		1,198		61		657		27
Other income producing property		3,632		145		5,195		245		4,073		163
Consumer		123		6		81		4		30		5
Other loans		211		—		211		16		—		—
Total Impaired Loans	$	25,715	$	913	$	28,651	$	1,216	$	26,565	$	598

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


	December 31,
(Dollars in thousands)	2016		2015
Commercial non-owner occupied real estate:
Construction and land development	$	672	$	1,090
Commercial non-owner occupied		578		184
Total commercial non-owner occupied real estate		1,250		1,274
Consumer real estate:
Consumer owner occupied		5,711		7,766
Home equity loans		1,629		1,769
Total consumer real estate		7,340		9,535
Commercial owner occupied real estate		2,189		3,056
Commercial and industrial		420		515
Other income producing property		356		746
Consumer		930		659
Restructured loans		1,979		2,662
Total loans on nonaccrual status	$	14,464	$	18,447

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)	2016		2015
Commercial non-owner occupied real estate:
Construction and land development	$	232	$	37
Commercial non-owner occupied		-		-
Total commercial non-owner occupied real estate		232		37
Consumer real estate:
Consumer owner occupied		1,405		976
Home equity loans		1,643		1,103
Total consumer real estate		3,048		2,079
Commercial owner occupied real estate		61		44
Commercial and industrial		1		1
Other income producing property		145		168
Consumer		1,241		1,435
Total loans on nonaccrual status	$	4,728	$	3,764

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, 2016 and 2015, the Company’s TDRs were not material.