Loans

Loans outstanding, by class, are summarized in the following table at carrying value and include net unamortized costs of $35.9 million, and $35.5 million, at December 31, 2017, and 2016, respectively. Acquired loans represent previously acquired loans, which include $2.3 million and $15.9 million loans covered under Loss Share Agreements with the FDIC at December 31, 2017 and 2016, respectively. Legacy loans represent existing portfolio loans originated by the Bank prior to each acquisition, additional loans originated subsequent to each acquisition and Government National Mortgage Association ("GNMA") optional repurchase loans (collectively, “legacy loans”).



	December 31, 2017
	Loans				Total
(in thousands)	Legacy		Acquired		Total
Commercial	$	675,544	$	135,655	$	811,199
SBA	133,186		8,022		141,208
Total commercial loans	808,730		143,677		952,407

Construction	243,112		5,205		248,317

Indirect automobile	1,716,156		—		1,716,156
Installment loans and personal lines of credit	24,158		1,837		25,995
Total consumer loans	1,740,314		1,837		1,742,151
Residential mortgage	461,194		28,527		489,721
Home equity lines of credit	131,049		17,321		148,370
Total mortgage loans	592,243		45,848		638,091
Total loans	$	3,384,399	$	196,567	$	3,580,966



	December 31, 2016
	Loans				Total
(in thousands)	Legacy		Acquired		Total
Commercial	$	601,557	$	183,180	$	784,737
SBA	143,339		6,440		149,779
Total commercial loans	744,896		189,620		934,516

Construction	225,795		13,115		238,910

Indirect automobile	1,575,865		—		1,575,865
Installment loans and personal lines of credit	26,291		6,934		33,225
Total consumer loans	1,602,156		6,934		1,609,090
Residential mortgage	346,512		40,070		386,582
Home equity lines of credit	107,390		25,776		133,166
Total mortgage loans	453,902		65,846		519,748
Total loans	$	3,026,749	$	275,515	$	3,302,264

The Company has extended loans to certain officers and directors. The Company does not believe these loans involve more than the normal risk of collectability or present other unfavorable features when originated. None of the related party loans were classified as nonaccrual, past due, restructured, or potential problem loans at December 31, 2017 or 2016.

Nonaccrual Loans

The accrual of interest income is generally discontinued when a loan becomes 90 days past due. Past due status is based on the contractual terms of the loan agreement. A loan may be placed on nonaccrual status sooner if reasonable doubt exists as to the full, timely collection of principal or interest. When a loan is placed on nonaccrual status, previously accrued and uncollected interest on loans held for investment is reversed against current period interest income. If a borrower on a residential mortgage loan previously sold makes no payment for three consecutive months, the Company, as servicer, may exercise its option to repurchase the delinquent loan from its securitized loan pool in an amount equal to 100% of the loan’s remaining principal balance less the principal payments advanced to the pool prior to the buyback, in which case no previously accrued interest would be reversed since the loan was previously sold. Interest advanced to the pool prior to the buyback is capitalized for future reimbursement as part of the government guarantee. Subsequent interest collected on nonaccrual loans is recorded as a principal reduction. Nonaccrual loans are returned to accrual status when all contractually due principal and interest amounts are brought current and the future payments are reasonably assured.

Loans in nonaccrual status are presented by class of loans in the following table. Delinquent residential mortgage loans repurchased under the GMA optional repurchase program are included in nonaccrual loans although the Company’s loss exposure on these loans is mitigated by the government guarantee in whole or in part. Purchased credit impaired (“PCI”) loans are considered to be performing due to the application of the accretion method and are excluded from the table below:



	December 31,
(in thousands)	2017		2016
Commercial	$	11,314	$	8,488
SBA	2,503		5,664
Total commercial loans	13,817		14,152

Construction	4,520		6,408

Indirect automobile	1,912		1,276
Installment loans and personal lines of credit	440		581
Total consumer loans	2,352		1,857
Residential mortgage	23,169		10,860
Home equity lines of credit	3,154		2,081
Total mortgage loans	26,323		12,941
Total nonaccrual loans	$	47,012	$	35,358

If such nonaccrual loans had been on a full accrual basis, interest income that would have been recorded on these loans was approximately $2.2 million, $1.6 million, and $1.3 million, in 2017, 2016, and 2015, respectively. Residential mortgage loans on nonaccrual status include $19.5 million and $7.8 million in repurchased GNMA government-guaranteed loans at December 31, 2017 and 2016, respectively.

There were $6.3 million and $6.2 million in loans greater than 90 days delinquent and still accruing at December 31, 2017 and December 31, 2016, respectively, primarily consisting of nonaccrual loans in accruing PCI pools.

Accruing loans delinquent 30-89 days, 90 days or more (including PCI loans), and troubled debt restructured loans (“TDRs”) accruing interest, presented by class of loans at December 31, 2017 and 2016, were as follows:



	December 31, 2017						December 31, 2016
(in thousands)	Accruing Delinquent 30-89 Days		Accruing Delinquent 90 Days or More		TDRs Accruing		Accruing Delinquent 30-89 Days		Accruing Delinquent 90 Days or More		TDRs Accruing
Commercial	3,821		5,722		8,468		1,407		4,231		5,942
SBA	5,560		70		3,800		1,452		—		3,788
Construction	—		102		—		32		343		—
Indirect automobile	3,971		87		1,960		2,972		—		1,474
Installment loans and personal lines of credit	449		—		33		39		26		—
Residential mortgage	7,447		268		495		380		1,577		406
Home equity lines of credit	831		64		51		1,320		12		53
Total	$	22,079	$	6,313	$	14,807	$	7,602	$	6,189	$	11,663

TDR Loans

The following table presents TDRs that occurred during 2017 and 2016, along with the type of modification. Modified PCI loans are not removed from their accounting pool and accounted for as TDRs, even if those loans would otherwise be deemed TDRs.



	Year Ended December 31, 2017				Year Ended December 31, 2016
(in thousands)	Interest Rate		Term		Interest Rate		Term
Commercial	$	2,753	$	4,355	$	—	$	140
SBA	—		—		—		—
Construction	—		—		—		—
Indirect automobile	—		—		—		478
Installment loans and personal lines of credit	—		33		—		—
Residential mortgage	1,528		784		—		148
Home equity lines of credit	—		—		—		—
Total	$	4,281	$	5,172	$	—	$	766

During the year ended December 31, 2017, the amount of loans which were restructured in the previous twelve months and subsequently re-defaulted during 2017 was $2.9 million, consisting of commercial, indirect automobile loans, installment and mortgage loans. During the year ended December 31, 2016, $232,000 in loans were restructured in the previous twelve months and subsequently re-defaulted during 2016, which were commercial and indirect automobile loans. The Company defines subsequently redefaulted as a payment default (i.e., 30 days contractually due) within 12 months of the restructuring date.

The Company had TDRs with a balance of $20.7 million and $15.4 million at December 31, 2017 and 2016, respectively. There were net chargeoffs of TDR loans of $238,000 and net recoveries of $931,000 for the years ended December 31, 2017 and 2016, respectively. Net charge-offs/recoveries on such loans are factored into the rolling historical loss rate, which is used in the calculation of the allowance for loan losses.

The Company is not committed to lend additional amounts as of December 31, 2017, and did not commit to lend additional amounts in 2017, or 2016, to customers with outstanding loans classified as TDRs.

Pledged Loans

Presented in the following table is the unpaid principal balance of loans held for investment that were pledged to the Federal Home Loan Bank of Atlanta (“FHLB of Atlanta”) as collateral for borrowings under a blanket lien arrangement at December 31, 2017 and 2016:



	December 31,
(in thousands)	2017		2016
Commercial real estate	$	242,695	$	257,645
Home equity lines of credit	94,526		93,560
Residential mortgage	351,591		223,013
Total	$	688,812	$	574,218

Indirect automobile loans with an unpaid principal balance of approximately $330.0 million, and $311.4 million were pledged to the Federal Reserve Bank of Atlanta (“FRB”) at December 31, 2017 and 2016, respectively, as collateral for potential Discount Window borrowings under a blanket lien arrangement.

Legacy Impaired Loans

The following tables present by class the unpaid principal balance, recorded investment, and related allowance for impaired legacy loans and acquired non PCI loans at December 31, 2017 and 2016. Legacy impaired loans include all TDRs and all other nonaccrual loans, excluding nonaccrual loans below the Company’s specific review threshold.



	December 31, 2017						December 31, 2016
(in thousands)	Unpaid Principal Balance		Recorded Investment⁽¹⁾		Related Allowance		Unpaid Principal Balance		Recorded Investment⁽¹⁾		Related Allowance
Impaired Loans with Allowance
Commercial	$	11,877	$	11,824	$	839	$	17,337	$	14,412	$	993
SBA	6,634		5,664		294		4,671		1,956		156
Construction	—		—		—		—		—		—
Indirect automobile	—		—		—		—		—		—
Installment loans and personal lines of credit	343		290		219		283		235		235
Residential mortgage	4,838		4,799		616		3,178		3,117		703
Home equity lines of credit	831		745		633		1,279		1,171		333
Loans	$	24,523	$	23,322	$	2,601	$	26,748	$	20,891	$	2,420



	December 31, 2017				December 31, 2016
(in thousands)	Unpaid Principal Balance		Recorded Investment ⁽¹⁾		Unpaid Principal Balance		Recorded Investment ⁽¹⁾
Impaired Loans with No Allowance
Commercial	$	14,839	$	12,509	$	7,267	$	5,888
SBA	1,815		1,133		9,135		8,045
Construction	5,995		4,520		7,875		6,394
Indirect automobile	—		—		—		—
Installment loans and personal lines of credit	1,445		163		1,445		163
Residential mortgage	21,955		21,398		9,464		9,347
Home equity lines of credit	2,452		2,318		1,149		749
Loans	$	48,501	$	42,041	$	36,335	$	30,586

⁽¹⁾ The primary difference between the unpaid principal balance and recorded investment represents charge-offs previously taken; it excludes accrued interest receivable due to materiality. Related allowance is calculated on the recorded investment, not the unpaid principal balance.

Included in impaired loans with no allowance are $19.5 million and $7.8 million in government-guaranteed residential mortgage loans at December 31, 2017 and 2016, respectively. These loans are collateralized by first mortgages on the underlying real estate collateral and are individually reviewed for a specific allowance. The Company's loss exposure on the repurchased government-guaranteed loans is mitigated by the government guarantee in whole or in part.

The average recorded investment in impaired loans and interest income recognized for 2017, 2016, and 2015, by class, are summarized in the table below. Impaired loans include legacy impaired loans, which include all TDRs, and all other nonaccrual loans.



	For the Year Ended
	December 31, 2017				December 31, 2016				December 31, 2015
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	23,098	$	658	$	16,915	$	819	$	21,641	$	709
SBA	7,770		221		11,574		407		14,594		586
Construction	5,500		184		5,709		290		6,810		37
Indirect automobile	2,616		264		2,117		234		1,829		284
Installment loans and personal lines of credit	473		194		422		120		473		128
Residential mortgage	18,657		548		7,970		174		4,789		112
Home equity lines of credit	2,549		104		1,204		117		840		63
Total	$	60,663	$	2,173	$	45,911	$	2,161	$	50,976	$	1,919

Credit Quality Indicators

The Company uses an asset quality ratings system to assign a numeric indicator of the credit quality and level of existing credit risk inherent in a loan ranging from 1 to 8, where a higher rating represents higher risk. Management regularly reviews loans in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading in accordance with the Company’s internal loan policy. These ratings are adjusted periodically as the Company becomes aware of changes in the credit quality of the underlying loans through its ongoing monitoring of the credit quality of the loan portfolio.

Indirect automobile loans typically receive a risk rating only when being downgraded to an adverse rating which typically occurs when payments of principal and interest are greater than 90 days past due. The Company uses a number of factors, including FICO scoring, to help evaluate the likelihood consumer borrowers will pay their credit obligations as agreed. The weighted-average FICO score for the indirect automobile portfolio was 762 at December 31, 2017 and 752 at December 31, 2016.

The following are definitions of the asset rating categories:


•	Pass – These categories include loans rated satisfactory with high, good, average or acceptable business and credit risk.


•	Special Mention – A special mention asset has potential weaknesses that deserve management’s close attention.


•	Substandard – A substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. A substandard asset has a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt.


•	Doubtful – Doubtful assets have all the weaknesses inherent in assets classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.


•	Loss – Loss assets are considered uncollectable and of such little value that their continuance as recorded assets is not warranted.

The following tables present the recorded investment in loans, by loan class, and risk rating category, as of December 31, 2017 and 2016:



(in thousands)	December 31, 2017
Asset Rating	Commercial		SBA		Construction		Indirect Automobile		Installment loans and personal lines of credit		Residential Mortgage		Home Equity Lines of Credit		Total
Pass	$	758,271	$	129,629	$	235,987	$	—	$	25,229	$	461,650	$	145,082	$	1,755,848
Special Mention	21,264		6,847		7,699		—		231		—		—		36,041
Substandard	31,664		4,732		4,631		4,972		535		28,071		3,288		77,893
Doubtful	—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—
	811,199		141,208		248,317		4,972		25,995		489,721		148,370		1,869,782
Ungraded Performing	—		—		—		1,711,184		—		—		—		1,711,184
Total	$	811,199	$	141,208	$	248,317	$	1,716,156	$	25,995	$	489,721	$	148,370	$	3,580,966



(in thousands)	December 31, 2016
Asset Rating	Commercial		SBA		Construction		Indirect Automobile		Installment loans and personal lines of credit		Residential Mortgage		Home Equity Lines of Credit		Total
Pass	$	721,133	$	131,047	$	229,978	$	—	$	32,521	$	368,492	$	129,847	$	1,613,018
Special Mention	31,040		10,997		615		—		45		2,759		550		46,006
Substandard	32,564		7,735		8,317		4,003		659		15,331		2,769		71,378
Doubtful	—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—
	784,737		149,779		238,910		4,003		33,225		386,582		133,166		1,730,402
Ungraded Performing	—		—		—		1,571,862		—		—		—		1,571,862
Total	$	784,737	$	149,779	$	238,910	$	1,575,865	$	33,225	$	386,582	$	133,166	$	3,302,264

Acquired Loans

As discussed in Note 2, during 2016, the Company acquired loans with a fair value of $147.3 million. Of this amount, $145.8 million were determined to have no evidence of deteriorated credit quality and are accounted for as acquired performing loans. The remaining $1.5 million were determined to have exhibited deteriorated credit quality since origination and are accounted for as PCI loans.

There were no acquisitions in 2017. The tables below show the balances acquired during 2016 for these two subsections of the portfolio as of the acquisition date:

Acquired Performing Loans



(in thousands)	2016
Contractually required principal and interest payments at acquisition	$	173,726
Fair value of acquired performing loans at acquisition	$	145,843

Acquired PCI Loans



(in thousands)	2016
Contractually required principal and interest payments at acquisition	$	2,515
Less: Nonaccretable difference (expected losses and foregone interest)	(962		)
Cash flows expected to be collected at acquisition	1,553
Less: Accretable yield	(92		)
Basis in acquired PCI loans at acquisition	$	1,461

The carrying amount and outstanding balance at December 31, 2017 of the PCI loans from acquisitions prior to 2017 was $26.6 million and $35.3 million, respectively. The carrying amount and outstanding balance of the PCI loans from acquisitions in 2016 and before was $37.3 million and $48.9 million, respectively, at December 31, 2016.

Changes in accretable yield, or income expected to be collected on PCI loans at December 31, 2017 and 2016, were as follows:



	December 31,
(in thousands)	2017			2016
Beginning balance	$	4,403		$	3,797
Increase due to acquired loans	—			92
Accretion of income	(2,950		)	(1,883		)
Other activity, net⁽¹⁾	1,552			2,397
Ending balance	$	3,005		$	4,403

⁽¹⁾Includes changes in cash flows expected to be collected due to changes in timing of liquidation events, prepayment assumptions, etc.