10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from                      to
Commission file number 001-10897

Carolina Financial Corporation

(Exact name of registrant as specified in its charter)

Delaware	57-1039673
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
288 Meeting Street, Charleston, South Carolina	29401
(Address of principal executive offices)	(Zip Code)

843-723-7700
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	x
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller Reporting Company	o
Emerging Growth Company	x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 22,611,363 shares of common stock, par value $0.01 per share, were issued and outstanding as of August 7, 2018.

TABLE OF CONTENTS

		Page
PART 1 –	FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	76
Item 4.	Controls and Procedures	76
PART II –	OTHER INFORMATION	76
Item 1.	Legal Proceedings	76
Item 1A.	Risk Factors	76
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	76
Item 3.	Defaults Upon Senior Securities	76
Item 4.	Mine Safety Disclosures	77
Item 5.	Other Information	77
Item 6.	Exhibits	77

2

PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
CAROLINA FINANCIAL CORPORATION CONSOLIDATED BALANCE SHEETS
	June 30, 2018 (Unaudited)			December 31, 2017 (Audited)
	(In thousands, except share data)
ASSETS
Cash and due from banks	$	27,327			25,254
Interest-bearing cash		54,751			55,998
Cash and cash equivalents		82,078			81,252
Securities available-for-sale (cost of $807,672 at June 30, 2018 and $736,975 at December 31, 2017)		804,968			743,239
Federal Home Loan Bank stock, at cost		19,019			19,065
Other investments		3,429			3,446
Derivative assets		6,001			2,803
Loans held for sale		39,473			35,292
Loans receivable, net of allowance for loan losses of $12,987 at June 30, 2018 and $11,478 at December 31, 2017		2,414,234			2,308,050
Premises and equipment, net		62,530			61,407
Accrued interest receivable		12,664			11,992
Real estate acquired through foreclosure, net		1,726			3,106
Deferred tax assets, net		6,073			2,436
Mortgage servicing rights		23,626			21,003
Cash value life insurance		57,982			57,195
Core deposit intangible		18,003			19,601
Goodwill		127,592			127,592
Other assets		13,693			21,538
Total assets	$	3,693,091			3,519,017
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Noninterest-bearing deposits	$	577,568			525,615
Interest-bearing deposits		2,131,230			2,079,314
Total deposits		2,708,798			2,604,929
Short-term borrowed funds		354,500			340,500
Long-term debt		46,347			72,259
Derivative liabilities		129			156
Drafts outstanding		10,454			7,324
Advances from borrowers for insurance and taxes		4,558			3,005
Accrued interest payable		1,560			1,126
Reserve for mortgage repurchase losses		1,592			1,892
Dividends payable to stockholders		1,354			1,051
Accrued expenses and other liabilities		12,015			11,394
Total liabilities		3,141,307			3,043,636
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $.01; 1,000,000 shares authorized at June 30, 2018 and December 31, 2017; no shares issued or outstanding		—			—
Common stock, par value $.01; 50,000,000 shares and 25,000,000 shares authorized at June 30, 2018 and December 31, 2017, respectively; 22,570,182 and 21,022,202 issued and outstanding at June 30, 2018 and December 31, 2017, respectively		226			210
Additional paid-in capital		412,300			348,037
Retained earnings		139,799			123,537
Accumulated other comprehensive income (loss), net of tax		(541	)		3,597
Total stockholders’ equity		551,784			475,381
Total liabilities and stockholders’ equity	$	3,693,091			3,519,017
See accompanying notes to consolidated financial statements.

3

CAROLINA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
	(In thousands, except share data)
Interest income
Loans	$	32,753			18,280			64,416			33,247
Investment securities		6,359			3,661			12,066			6,214
Dividends from Federal Home Loan Bank stock		263			115			438			216
Other interest income		102			67			234			115
Total interest income		39,477			22,123			77,154			39,792
Interest expense
Deposits		4,248			2,098			7,891			3,790
Short-term borrowed funds		1,705			429			2,958			784
Long-term debt		619			498			1,269			850
Total interest expense		6,572			3,025			12,118			5,424
Net interest income		32,905			19,098			65,036			34,368
Provision for loan losses		559			—			559			—
Net interest income after provision for loan losses		32,346			19,098			64,477			34,368
Noninterest income
Mortgage banking income		4,215			4,289			8,017			7,897
Deposit service charges		1,988			998			4,012			1,856
Net gain (loss) on sale of securities		(746	)		621			(1,443	)		806
Fair value adjustments on interest rate swaps		451			(69	)		1,255			(127	)
Net increase in cash value life insurance		385			281			775			492
Mortgage loan servicing income		2,090			1,604			4,114			3,170
Other		2,644			1,081			4,346			1,941
Total noninterest income		11,027			8,805			21,076			16,035
Noninterest expense
Salaries and employee benefits		13,541			9,255			27,210			17,864
Occupancy and equipment		4,094			2,439			7,747			4,621
Marketing and public relations		322			416			698			797
FDIC insurance		265			75			520			175
Recovery of mortgage loan repurchase losses		(150	)		(225	)		(300	)		(450	)
Legal expense		157			151			233			216
Other real estate expense, net		105			26			11			45
Mortgage subservicing expense		568			505			1,132			991
Amortization of mortgage servicing rights		889			665			1,868			1,335
Merger related expenses		506			279			15,216			1,599
Other		4,074			2,304			7,635			4,283
Total noninterest expense		24,371			15,890			61,970			31,476
Income before income taxes		19,002			12,013			23,583			18,927
Income tax expense		4,036			2,673			4,561			4,684
Net income	$	14,966			9,340			19,022			14,243
Earnings per common share:
Basic	$	0.70			0.58		$	0.91			0.95
Diluted	$	0.70			0.58		$	0.90			0.94
Dividends per common share	$	0.06			0.04		$	0.11			0.08
Weighted average common shares outstanding:
Basic		21,243,094			16,029,332			20,961,182			14,980,349
Diluted		21,454,039			16,180,171			21,174,936			15,144,796
See accompanying notes to consolidated financial statements.

4

CAROLINA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
	For the Three Months June 30,						For the Six Months June 30,
	2018			2017			2018			2017
	(In thousands)
Net income	$	14,966			9,340			19,022			14,243
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities		(1,759	)		4,650			(8,323	)		8,125
Tax effect		440			(1,674	)		2,081			(2,925	)
Reclassification adjustment for (gain) loss included in earnings		746			(621	)		1,443			(806	)
Tax effect		(187	)		224			(361	)		290
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges		356			(389	)		1,363			(251	)
Tax effect		(89	)		140			(341	)		90
Other comprehensive income, net of tax		(493	)		2,330			(4,138	)		4,523
Comprehensive income	$	14,473			11,670			14,884			18,766
See accompanying notes to consolidated financial statements.

5

CAROLINA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (Unaudited)
												Accumulated
						Additional						Other
	Common Stock					Paid-in			Retained			Comprehensive
	Shares			Amount		Capital			Earnings			Income (Loss)			Total
	(In thousands, except share data)
Balance, December 31, 2016		12,548,328		$	125		66,156			98,451			(1,542	)		163,190
Issuance of common stock, net of offering expenses		1,807,143			18		47,653			—			—			47,671
Stock issued - Greer Bancshares Incorporated acquisition		1,789,523			18		54,205			—			—			54,223
Stock awards		68,385			1		108			—			—			109
Vested stock awards surrendered in cashless exercise		(56,436	)		—		(365	)		(1,306	)		—			(1,671	)
Stock-based compensation expense, net		—			—		752			—			—			752
Net income		—			—		—			14,243			—			14,243
Dividends declared to stockholders		—			—		—			(1,222	)		—			(1,222	)
Other comprehensive income, net of tax		—			—		—			—			4,523			4,523
Balance, June 30, 2017		16,156,943		$	162		168,509			110,166			2,981			281,818
Balance, December 31, 2017		21,022,202		$	210		348,037			123,537			3,597			475,381
Issuance of common stock, net of offering expenses		1,500,000			15		63,007			—			—			63,022
Stock awards		58,005			1		113			—			—			114
Vested stock awards surrendered in cashless exercise		(15,089	)		—		(246	)		(353	)		—			(599	)
Stock options exercised		5,064			—		56			—			—			56
Stock-based compensation expense, net		—			—		1,333			—			—			1,333
Net income		—			—		—			19,022			—			19,022
Dividends declared to stockholders		—			—		—			(2,407	)					(2,407	)
Other comprehensive income, net of tax		—			—		—			—			(4,138	)		(4,138	)
Balance, June 30, 2018		22,570,182		$	226		412,300			139,799			(541	)		551,784
See accompanying notes to consolidated financial statements.

6

CAROLINA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	For the Six Months Ended June 30,
	2018			2017
	(In thousands)
Cash flows from operating activities:
Net income	$	19,022			14,243
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for loan losses		559			—
Amortization of unearned discount/premiums on investments, net		2,520			1,762
Accretion of deferred loan fees		(981	)		(588	)
Accretion of acquired loans		(4,817	)		(1,451	)
Amortization of core deposit intangibles		1,598			302
(Gain) loss on sale of available-for-sale securities, net		1,443			(806	)
Mortgage banking income		(8,017	)		(7,897	)
Originations of loans held for sale		(450,286	)		(433,852	)
Proceeds from sale of loans held for sale		454,122			437,191
Amortization of fair value adjustments on subordinated debentures		88			31
Recovery of mortgage loan repurchase losses		(300	)		(450	)
Mortgage repurchase loan losses paid, net of recoveries		—			(76	)
Fair value adjustments on interest rate swaps		(1,255	)		127
Stock-based compensation		1,333			752
Increase in cash surrender value of bank owned life insurance		(775	)		(492	)
Depreciation		2,001			1,219
Loss on disposals of premises and equipment		8			3
(Gain) on sale of real estate acquired through foreclosure		(53	)		(21	)
Write-down of real estate acquired through foreclosure		126			—
Originations of mortgage servicing rights		(4,491	)		(2,995	)
Amortization of mortgage servicing rights		1,868			1,335
(Increase) decrease in:
Accrued interest receivable		(672	)		(568	)
Other assets		7,158			(2,276	)
Increase (decrease) in:
Accrued interest payable		434			170
Dividends payable to stockholders		303			144
Accrued expenses and other liabilities		(2,041	)		(9,511	)
Cash flows (used in) provided by operating activities		18,895			(3,704	)
					Continued

7

CAROLINA FINANCIAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED (Unaudited)
	For the Six Months Ended June 30,
	2018			2017
	(In thousands)
Cash flows from investing activities:
Activity in available-for-sale securities:
Purchases	$	(215,651	)		(144,383	)
Maturities, payments and calls		57,796			24,591
Proceeds from sales		85,300			81,021
Increase in other investments		—			(14	)
Decrease in Federal Home Loan Bank stock		46			2,122
Increase in loans receivable, net		(101,036	)		(61,160	)
Purchase of premises and equipment		(3,146	)		(2,910	)
Proceeds from disposals of premises and equipment		1			—
Proceeds from sale of real estate acquired through foreclosure		1,398			582
Net cash received for acquisitions		—			37,764
Cash flows used in investing activities		(175,292	)		(62,387	)
Cash flows from financing activities:
Net increase in deposit accounts		103,869			94,403
Net decrease in Federal Home Loan Bank advances		(12,000	)		(53,500	)
Net (decrease) increase in drafts outstanding		3,130			(2,354	)
Net increase in advances from borrowers for insurance and taxes		1,553			1,626
Cash dividends paid on common stock		(2,407	)		(1,078	)
Proceeds from exercise of stock options		56			—
Proceeds from issuance of common stock		63,022			47,671
Cash flows provided by financing activities		157,223			86,768
Net increase in cash and cash equivalents		826			20,677
Cash and cash equivalents, beginning of period		81,252			24,352
Cash and cash equivalents, end of period	$	82,078			45,029
Supplemental disclosure:
Cash paid for:
Interest on deposits and borrowed funds	$	11,684			4,996
Income taxes paid, net of refunds		63			4,025
Noncash investing activities:
Transfer of loans receivable to real estate acquired through foreclosure	$	91			757
Acquisitions:
Fair value of tangible assets acquired	$	—			380,011
Other intangible assets acquired		—			4,480
Liabilities assumed		—			358,866
Net identifiable assets acquired over liabilities assumed		—			25,625
Common stock issued in acquisition		—			54,223
Goodwill		—			33,020
See accompanying notes to consolidated financial statements.

8

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Carolina Financial Corporation (“Carolina Financial” or the “Company”), incorporated under the laws of the State of Delaware, is a financial holding company with one wholly owned subsidiary, CresCom Bank (the “Bank”). CresCom Bank operates five wholly-owned subsidiaries, Crescent Mortgage Company, Carolina Services Corporation of Charleston (“Carolina Services”), DTFS, Inc., CresCom Insurance, LLC and CresCom Leasing, LLC. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. In consolidation, all material intercompany accounts and transactions have been eliminated. The results of operations of the businesses acquired in transactions accounted for as purchases are included only from the dates of acquisition. All majority-owned subsidiaries are consolidated unless control is temporary or does not rest with the Company.

At June 30, 2018, statutory business trusts (“Trusts”) created or acquired by the Company had outstanding trust preferred securities with an aggregate par value of $36.0 million. The principal assets of the Trusts are $37.1 million of the Company’s subordinated debentures with identical rates of interest and maturities as the trust preferred securities. The Trusts have issued $1.1 million of common securities to the Company and are included in other investments in the accompanying consolidated balance sheets. The Trusts are not consolidated subsidiaries of the Company.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2018. There have been no significant changes to the accounting policies as disclosed in the Company’s Form 10-K.

Management’s Estimates

The financial statements are prepared in accordance with GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, including valuation for impaired loans, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, the valuation of securities, the valuation of derivative instruments, the valuation of assets acquired and liabilities assumed in business combinations, the valuation of mortgage servicing rights, the determination of the reserve for mortgage loan repurchase losses, asserted and unasserted legal claims and deferred tax assets or liabilities. In connection with the determination of the allowance for loan losses and foreclosed real estate, management obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

9

Management uses available information to recognize losses on loans and foreclosed real estate. However, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses and foreclosed real estate. It is possible that the allowance for loan losses and valuation of foreclosed real estate may change materially in the near term.

Earnings Per Share

Basic earnings per share (“EPS”) represents income available to common stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects additional shares that would have been outstanding if dilutive potential shares had been issued. Potential shares that may be issued by the Company relate solely to outstanding stock options, restricted stock (non-vested shares), restricted stock units (“RSUs”) and warrants, and are determined using the treasury stock method. Under the treasury stock method, the number of incremental shares is determined by assuming the issuance of stock for the outstanding stock options, unvested restricted stock and RSUs, and warrants, reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price for the period of the Company’s stock.

Subsequent Events

Subsequent events are material events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the statement of financial condition but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events were identified that required accrual or disclosure .

Reclassification

Certain reclassifications of accounts reported for previous periods have been made in these consolidated financial statements. Such reclassifications had no effect on stockholders’ equity or the net income as previously reported.

Recently Adopted Accounting Pronouncements

During the first quarter of 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities. The amendments included within this standard, which are applied prospectively, require the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using an exit price notion. Prior to adopting the amendments included in the standard, the Company was allowed to measure fair value under an entry price notion. Refer to Note 8 -Estimated Fair Value of Financial Instruments for more information.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 updates the new revenue standard by clarifying the principal versus agent implementation guidance, but does not change the core principle of the new standard. The updates to the principal versus agent guidance: (i) require an entity to determine whether it is a principal or an agent for each distinct good or service (or a distinct bundle of goods or services) to be provided to the customer; (ii) illustrate how an entity that is a principal might apply the control principle to goods, services, or rights to services, when another party is involved in providing goods or services to a customer and (iii) clarify that the purpose of certain specific control indicators is to support or assist in the assessment of whether an entity controls a good or service before it is transferred to the customer, provide more specific guidance on how the indicators should be considered, and clarify that their relevance will vary depending on the facts and circumstances. The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. The Company has evaluated ASU 2016-08 and 2014-09 and determined that this guidance did not have a material impact on the way the Company currently recognizes revenue or the way it recognizes expenses related to those revenue streams. The Company adopted ASU No. 2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Consistent with the modified retrospective approach, the Company did not adjust prior period amounts.

10

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) (“ASU 2017-09”). ASU 2017-09 provides clarity when applying guidance to a change to the terms or conditions of a share-based payment award. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU No. 2017-09 and its related amendments on its required effective date of January 1, 2018. The amendments will be applied prospectively to an award modified on or after the adoption date. The Company has determined that this guidance did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 amends the requirements of the Derivatives and Hedging Topic of the Accounting Standards Codification (“ASC”) to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Cost (Subtopic 310-20):  Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”).  ASU 2017-08 shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. The amendments do not require an accounting change for securities held at a discount; an entity will continue to amortize to the contractual maturity date the discount related to callable debt securities. The amendments apply to the amortization of premiums on callable debt securities with explicit, non-contingent call features that are callable at fixed prices on preset dates.  For public business entities, ASU 2017-08 is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities, including in an interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendments are adopted.  The Company has determined that this guidance will not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 applies a right-of-use (“ROU”) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification.  For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018.   In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply.   The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s financial statements. The Company expects the new guidance will require these lease arrangements to be recognized on the consolidated statements of condition as a right-of-use asset and a corresponding lease liability. Therefore, the Company’s preliminary evaluation indicates the provisions of ASU No. 2016-02 are expected to impact the Company’s consolidated statements of condition, as well as our regulatory capital ratios. However, the Company continues to evaluate the extent of potential impact the new guidance will have on the Company’s consolidated financial statements. The Company is nearing completion of identifying a complete inventory of arrangements containing a lease and accumulating the lease data necessary to apply the amended guidance. In addition, the Company has obtained new software to aid in the transition to the new leasing guidance.

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In January 2017, the FASB issued ASU No. 2017-04, Intangible-Goodwill and other (Topic 350):  Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under Accounting Standards Codification ASC 350 and eliminating Step 2 from the goodwill impairment test.  As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount.  An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those years. The amendments should be adopted prospectively and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company has determined that this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments  (“ASU 2016-13”).  ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.  The CECL model is expected to result in earlier recognition of credit losses.  ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities.  The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.   The Company is continuing to assess the impact that this new guidance will have on its consolidated financial statements through its implementation team. The team has assigned roles and responsibilities, key tasks to complete, and a general timeline to be followed. The implementation team meets periodically to discuss the latest developments and ensure progress is being made. The team also keeps current on evolving interpretations and industry practices related to ASU 2016-13 via webcasts, publications, and conferences. The Company has engaged an outside consultant to assist with the methodology review and validation, as well as other key aspects of implementing the standard. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s consolidated financial statements, in particular the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE 2 – BUSINESS COMBINATIONS

On November 1, 2017, the Company acquired all of the common stock of First South Bancorp, Inc., the holding company for First South Bank (“First South”). Under the terms of the merger agreement, each share of First South common stock was converted into the right to receive 0.5064 shares of the Company’s common stock.

The following table presents a summary of total consideration paid by the Company at the acquisition date (dollars in thousand).

Common stock issued (4,822,540 shares at $36.85 per share)	$	177,711
Cash in lieu of fractional shares and fair value of stock options		983
Total consideration paid	$	178,694

The assets acquired and liabilities assumed from First South were recorded at their fair value as of the closing date of the merger. Fair values were preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values became available. Goodwill of $90.3 million was recorded at the time of the acquisition. The following table summarizes the consideration paid by the Company in the merger with First South and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

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	As Reported by			Fair Value			As Recorded by
November 1, 2017	First South			Adjustments			the Company
Assets	(In thousands)
Cash and cash equivalents	$	66,109						66,109
Securities available-for-sale		186,038						186,038
Federal Home Loan Bank stock		1,593						1,593
Loans held for sale		1,282						1,282
Loans receivable		783,779			(24,620	)(a)		759,159
Allowance for loan losses		(9,495	)		9,495	(b)		—
Premises and equipment		10,761			1,500	(c)		12,261
Foreclosed assets		1,922			(556	)(d)		1,366
Core deposit intangible		1,410			11,090	(e)		12,500
Deferred tax asset, net		3,961			238	(f)		4,199
Other assets		33,552			(3,417	)(g)		30,135
Total assets acquired	$	1,080,912			(6,270	)		1,074,642
Liabilities
Deposits	$	952,573			78	(h)		952,651
Borrowings		26,810			(1,439	)(i)		25,371
Other liabilities		8,515			(284	)(j)		8,231
Total liabilities assumed	$	987,898			(1,645	)		986,253
Net identifiable assets acquired over liabilities assumed								88,389
Total consideration paid								178,694
Goodwill							$	90,305

Explanation of fair value adjustments:

(a)	Represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.
(b)	Reflects the elimination of First South’s historical allowance for loan losses.
(c)	Reflects fair value adjustments on acquired branch and administrative offices based on the Company’s assessment.
(d)	Reflects the impact of acquisition accounting fair value adjustments.
(e)	Reflects the fair value adjustment to record the estimated core deposit intangible based on the Company’s assessment.
(f)	Reflects the tax impact of acquisition accounting fair value adjustments.
(g)	Reflects the fair value adjustment based on the Company’s evaluation of acquired other assets.
(h)	Represents the fair value adjustment due to interest rate factors.
(i)	Represents the fair value adjustment due to interest rate factors.
(j)	Reflects the fair value adjustment based on the Company’s evaluation of acquired other liabilities.

Acquisition of Greer Bancshares Incorporated

On March 18, 2017, the Company completed its acquisition of Greer Bancshares Incorporated (“Greer”), the holding company for Greer State Bank. Under the terms of the merger agreement, each share of Greer common stock was converted into the right to receive $18.00 in cash or 0.782 shares of the Company’s common stock, or a combination thereof, subject to certain limitations.

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The following table presents a summary of total consideration paid by the Company at the acquisition date (dollars in thousand).

Common stock issued (1,789,523 shares at $30.30 per share)	$	54,223
Cash payments to common stockholders		4,422
Total consideration paid	$	58,645

The assets acquired and liabilities assumed from Greer were recorded at their fair value as of the closing date of the merger. Fair values were preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values became available. Goodwill of $33.0 million was recorded at the time of the acquisition. The following table summarizes the consideration paid by the Company in the merger with Greer and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

	As Reported			Fair Value			As Recorded by
March 18, 2017	by Greer			Adjustments			the Company
Assets	(In thousands)
Cash and cash equivalents	$	42,187			—			42,187
Securities available for sale		121,374			—			121,374
Loans held for sale		105			—			105
Loans receivable		205,209			(10,559	)(a)		194,650
Allowance for loan losses		(3,198	)		3,198	(b)		—
Premises and equipment		3,928			4,202	(c)		8,130
Foreclosed assets		42			—			42
Core deposit intangible		—			4,480	(d)		4,480
Deferred tax asset, net		3,831			(1,434	)(e)		2,397
Other assets		11,367			(241	)(f)		11,126
Total assets acquired	$	384,845			(354	)		384,491
Liabilities
Deposits	$	310,866			200	(g)		311,066
Borrowings		43,712			(3,510	)(h)		40,202
Other liabilities		7,086			512	(i)		7,598
Total liabilities assumed	$	361,664			(2,798	)		358,866
Net identifiable assets acquired over liabilities assumed								25,625
Total consideration paid								58,645
Goodwill							$	33,020

Explanation of fair value adjustments:
(a)	Adjustment represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.
(b)	Adjustment reflects the elimination of Greer’s historical allowance for loan losses.
(c)	Adjustment reflects fair value adjustments on acquired branch and administrative offices based on third party appraisals.
(d)	Adjustment reflects the fair value adjustment to record the estimated core deposit intangible based on the Company’s third party valuation report.
(e)	Adjustment reflects the tax impact of acquisition accounting fair value adjustments.
(f)	Adjustment reflects the fair value adjustment based on the Company’s evaluation of acquired other assets.
(g)	Adjustment represents the fair value adjustment due to interest rate factors.
(h)	Adjustment represents the fair value adjustment due to interest rate factors.
(i)	Adjustment reflects the fair value adjustment based on the Company’s evaluation of acquired other liabilities.

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NOTE 3 – SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of securities available-for-sale at June 30, 2018 and December 31, 2017 follows:

	June 30, 2018									December 31, 2017
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Securities available-for-sale:	(In thousands)
Municipal securities	$	200,526		2,508		(1,457	)		201,577		240,904		6,790		(344	)		247,350
US government agencies		13,000		—		(55	)		12,945		11,983		34		(9	)		12,008
Collateralized loan obligations		172,154		404		(50	)		172,508		128,080		581		(18	)		128,643
Corporate securities		6,902		90		(4	)		6,989		6,891		115		—			7,006
Mortgage-backed securities:
Agency		236,826		504		(3,574	)		233,757		243,075		1,234		(714	)		243,595
Non-agency		167,028		540		(1,684	)		165,884		94,834		551		(260	)		95,125
Total mortgage-backed securities		403,854		1,044		(5,258	)		399,641		337,909		1,785		(974	)		338,720
Trust preferred securities		11,236		1,757		(1,686	)		11,308		11,208		1,132		(2,828	)		9,512
Total	$	807,672		5,803		(8,510	)		804,968		736,975		10,437		(4,173	)		743,239

The Company had no held-to-maturity securities as of June 30, 2018 or December 31, 2017.

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2018 follows:

	At June 30, 2018
	Amortized		Fair
	Cost		Value
	(In thousands)
Securities available-for-sale:
Less than one year	$	309		309
One to five years		9,161		9,149
Six to ten years		111,914		111,531
After ten years		686,288		683,979
Total	$	807,672		804,968

The contractual maturity dates of the securities were used for mortgage-backed securities and asset-backed securities. No estimates were made to anticipate principal repayments.

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The following table summarizes the gross realized gains and losses from sales of investment securities available-for-sale for the periods indicated.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Proceeds	$	34,122			43,324			85,300			81,021
Realized gains	$	55			647			69			1,020
Realized losses		(801	)		(26	)		(1,512	)		(214	)
Total investment securities gains (losses), net	$	(746	)		621			(1,443	)		806

At June 30, 2018, the Company had pledged securities with a market value of $89.4 million as collateral for Federal Home Loan Bank (“FHLB”) advances.

At June 30, 2018, the Company has pledged $178.4 million of securities to secure public agency funds.

At June 30, 2018, the Company had $192.9 million of loans pledged for FRB advances.

The following tables summarize gross unrealized losses on investment securities and the fair market value of the related securities at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

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	At June 30, 2018
	Less than 12 Months							12 Months or Greater							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
	(In thousands)
Available-for-sale:
Municipal securities	$	80,659		79,430		(1,229	)		3,574		3,346		(228	)		84,233		82,776		(1,457	)
US government agencies		13,000		12,945		(55	)		—		—		—			13,000		12,945		(55	)
Collateralized loan obligations		57,909		57,859		(50	)		—		—		—			57,909		57,859		(50	)
Corporate securities		479		475		(4	)		—		—		—			479		475		(4	)
Mortgage-backed securities:
Agency		170,067		167,006		(3,061	)		19,824		19,311		(513	)		189,891		186,317		(3,574	)
Non-agency		100,771		99,166		(1,605	)		10,691		10,613		(78	)		111,462		109,779		(1,684	)
Total mortgage-backed securities		270,838		266,172		(4,666	)		30,515		29,924		(591	)		301,353		296,096		(5,258	)
Trust preferred securities		—		—		—			8,467		6,781		(1,686	)		8,467		6,781		(1,686	)
Total	$	422,885		416,881		(6,004	)		42,556		40,051		(2,505	)		465,441		456,932		(8,510	)
	At December 31, 2017
	Less than 12 Months							12 Months or Greater							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
	(In thousands)
Available-for-sale:
Municipal securities	$	23,849		23,631		(218	)		3,606		3,480		(126	)		27,455		27,111		(344	)
US government agencies		1,681		1,672		(9	)		—		—		—			1,681		1,672		(9	)
Collateralized loan obligations		23,000		22,982		(18	)		—		—		—			23,000		22,982		(18	)
Mortgage-backed securities:
Agency		107,501		107,011		(490	)		17,484		17,260		(224	)		124,985		124,271		(714	)
Non-agency		21,874		21,704		(170	)		9,889		9,799		(90	)		31,763		31,503		(260	)
Total mortgage-backed securities		129,375		128,715		(660	)		27,373		27,059		(314	)		156,748		155,774		(974	)
Trust preferred securities		—		—		—			8,516		5,688		(2,828	)		8,516		5,688		(2,828	)
Total	$	177,905		177,000		(905	)		39,495		36,227		(3,268	)		217,400		213,227		(4,173	)

The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”). Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospect of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value. If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or a portion may be recognized in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment.

At June 30, 2018 and December 31, 2017, the Company had 221 and 135, respectively, individual investments available-for-sale that were in an unrealized loss position. The unrealized losses on the Company’s investments in US government-sponsored agencies, municipal securities, mortgage-backed securities (agency and non-agency), and trust preferred securities summarized above were attributable primarily to changes in interest rates. Management has performed various analyses, including cash flows testing as needed, and determined that no OTTI expense was necessary during 2018 or 2017.

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NOTE 4 – DERIVATIVES

In the ordinary course of business, the Company enters into various types of derivative transactions. For its related mortgage banking activities, the Company holds derivative instruments, which consist of rate lock agreements related to expected funding of fixed-rate mortgage loans to customers (interest rate lock commitments) and forward commitments to sell mortgage-backed securities and individual fixed-rate mortgage loans. The Company’s objective in obtaining the forward commitments is to mitigate the interest rate risk associated with the interest rate lock commitments and the mortgage loans that are held for sale. Derivative instruments not related to mortgage banking activities primarily relate to interest rate swap agreements.

The derivative positions of the Company at June 30, 2018 and December 31, 2017 are as follows:

	At June 30,				At December 31,
	2018				2017
	Fair		Notional		Fair		Notional
	Value		Value		Value		Value
	(In thousands)
Derivative assets:
Cash flow hedges:
Interest rate swaps	$	2,007		70,000		644		45,000
Non-hedging derivatives:
Interest rate swaps		2,007		45,000		964		50,000
Mortgage loan interest rate lock commitments		1,476		126,031		890		98,584
Mortgage-backed securities forward sales commitments		511		25,853		305		23,401
Total derivative assets	$	6,001		266,884		2,803		216,985
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		—		—		95		5,000
Mortgage-backed securities forward sales commitments		129		90,000		61		75,000
Total derivative liabilities	$	129		90,000		156		80,000

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Non-Designated Hedges

Derivative Loan Commitments and Forward Sales Commitments

The Company enters into mortgage loan commitments that are also referred to as derivative loan commitments, if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that these loans will subsequently be sold in the secondary market.

Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of the rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments typically decreases. Conversely, if interest rates decrease, the value of these loan commitments typically increases.

To protect against the price risk inherent in derivative loan commitments, the Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments.

With a “mandatory delivery” contract, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a “pair-off” fee, based on then-current market prices, to the investor to compensate the investor for the shortfall.

With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments.

Derivatives related to these commitments are recorded as either a derivative asset or a derivative liability on the balance sheet and are measured at fair value. Both the interest rate lock commitments and the forward commitments are reported at fair value, with adjustments recorded in current period earnings in “mortgage banking income” within noninterest income in the consolidated statements of operations.

Interest Rate Swaps

The Company enters into interest rate swaps that do not meet the hedge accounting requirements and are recorded at fair value as a derivative asset or liability. Interest rate swaps that are not designated as hedges are primarily used to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities including duration mismatches. Fair value changes are recognized in noninterest income as “fair value adjustments on interest rate swaps.”

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using certain interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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The Company has entered into interest rate swaps to reduce the exposure to variability in interest-related cash outflows attributable to changes in forecasted LIBOR-based FHLB borrowings. These derivative instruments are designated as cash flow hedges. The hedged item is the LIBOR portion of the series of future adjustable rate borrowings over the term of the interest rate swap. Accordingly, changes to the amount of interest payment cash flows for the hedged transactions attributable to a change in credit risk are excluded from our assessment of hedge effectiveness. The Company tests for hedging effectiveness on a quarterly basis. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company has not recorded any hedge ineffectiveness since inception.

Risk Management Objective of Using Derivatives 

When using derivatives to hedge fair value and cash flow risks, the Company exposes itself to potential credit risk from the counterparty to the hedging instrument. This credit risk is normally a small percentage of the notional amount and fluctuates as interest rates change. The Company analyzes and approves credit risk for all potential derivative counterparties prior to execution of any derivative transaction. The Company seeks to minimize credit risk by dealing with highly rated counterparties and by obtaining collateralization for exposures above certain predetermined limits. If significant counterparty risk is determined, the Company would adjust the fair value of the derivative recorded asset balance to consider such risk. 

NOTE 5 - LOANS RECEIVABLE, NET

We emphasize a range of lending services, including commercial and residential real estate mortgage loans, real estate construction loans, commercial and industrial loans, commercial leases, and consumer loans. Our customers are generally individuals and small to medium-sized businesses and professional firms that are located in or conduct a substantial portion of their business in our market areas. We have focused our lending activities primarily on the professional market, including doctors, dentists, small business to medium-sized owners and commercial real estate developers. 

Certain credit risks are inherent in making loans. These include prepayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers. We attempt to mitigate repayment risks by adhering to internal credit policies and procedures. These policies and procedures include officer and customer lending limits, with approval processes for larger loans, documentation examination, and follow-up procedures for any exceptions to credit policies. Our loan approval policies provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower exceeds the maximum senior officer’s lending authority, the loan request will be considered by the management loan committee, or MLC, which is comprised of four members, all of whom are part of the senior management team of the Bank. The MLC meets weekly to approve loans with total loan commitment relationships generally exceeding $2.5 million. The loan authority of the MLC is equal to two-thirds of the legal lending limit of the Bank which is equivalent to the in-house loan limit. Total credit exposure above the in-house limit requires approval by the majority of the board of directors. We do not make any loans to any director, executive officer of the Bank, or the related interests of each, unless the loan is approved by the full Board of Directors of the Bank and is on terms not more favorable than would be available to a person not affiliated with the Bank. 

The following is a description of the risk characteristics of the material loan portfolio segments: 

Residential Mortgage Loans and Home Equity Loans. We generally originate and hold short-term and long-term first mortgages and traditional second mortgage residential real estate loans. Generally, we limit the loan-to-value ratio on our residential real estate loans to 80%. Loans over 80% LTV generally require private mortgage insurance. We offer fixed and adjustable rate residential real estate loans with terms of up to 30 years. We also offer a variety of lot loan options to consumers to purchase the lot on which they intend to build their home. The options available depend on whether the borrower intends to begin building within 12 months of the lot purchase or at an undetermined future date. We also offer traditional home equity loans and lines of credit. Our underwriting criteria for, and the risks associated with, home equity loans and lines of credit are generally the same as those for first mortgage loans. Home equity loans typically have terms of 10 years or less. 

Commercial Real Estate. Commercial real estate loans generally have terms of five years or less, although payments may be structured on a longer amortization basis. We evaluate each borrower on an individual basis and attempt to determine their business risks and credit profile. We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, generally does not exceed 80%. We also generally require that a borrower’s cash flow exceed 120% of monthly debt service obligations. In order to ensure secondary sources of payment and liquidity to support a loan request, we typically review all of the personal financial statements of the principal owners and require their personal guarantees.

20

Real Estate Construction and Development Loans. We offer fixed and adjustable rate residential and commercial construction loan financing to builders and developers and to consumers who wish to build their own home. The term of construction and development loans generally is limited to 18 months, although payments may be structured on a longer amortization basis. Most loans will mature and require payment in full upon the sale of the property. We believe that construction and development loans generally carry a higher degree of risk than long-term financing of existing properties because repayment depends on the ultimate completion of the project and usually on the subsequent sale of the property. We attempt to reduce risk associated with construction and development loans by obtaining personal guarantees and by keeping the maximum loan-to-value ratio at or below 65%-80% of the lesser of cost or appraised value, depending on the project type. Generally, we do not have interest reserves built into loan commitments but require periodic cash payments for interest from the borrower’s cash flow. 

Commercial Loans. We make loans for commercial purposes in various lines of businesses, including the manufacturing industry, service industry, and professional service areas. Commercial loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or if they are secured, the value of the collateral may be difficult to assess and more likely to decrease than real estate. Equipment loans typically will be made for a term of 10 years or less at fixed or variable rates, with the loan fully amortized over the term and secured by the financed equipment. Generally, we limit the loan-to-value ratio on these loans to 75% of cost. Working capital loans typically have terms not exceeding one year and usually are secured by accounts receivable, inventory, or personal guarantees of the principals of the business. For loans secured by accounts receivable or inventory, principal will typically be repaid as the assets securing the loan are converted into cash, and in other cases principal will typically be due at maturity. Trade letters of credit, standby letters of credit, and foreign exchange will generally be handled through a correspondent bank as agent for the Bank. 

The Company’s primary markets are generally concentrated in real estate lending. However, in order to diversify our lending portfolio, the Company purchases nationally syndicated commercial and industrial loans. These loans typically have terms of seven years and are generally tied to a floating rate index such as LIBOR or prime. To effectively manage this line of business, the Company has an experienced senior lending executive with relevant experience to manage this area of this segment of the loan portfolio. In addition, the Company engaged a consulting firm that specializes in syndicated loans to assist in monitoring performance analytics. As of June 30, 2018 and December 31, 2017, there were approximately $89.3 million and $75.0 million in broadly syndicated loans outstanding. Syndicated loans are grouped within commercial business loans below. 

The Bank began originating leases, primarily on equipment utilized for business purposes, as a result of the First South acquisition. Lease terms generally range from 12 to 60 months and include options to purchase the leased equipment at the end of the lease. Most leases provide 100% of the cost of the equipment and are secured by the leased equipment. The Company requires the leased equipment to be insured and that we be listed as a loss payee and named as an additional insured on the insurance policy. We manage credit risk associated with our lease financing loan class based upon the dollar amount of the lease and the level of credit risk. We follow a formal review process that entails analysis of the following factors: equipment value/residual value, exposure levels, jurisdiction risk, industry risk, guarantor requirements, and regulatory compliance. As of June 30, 2018 and December 31, 2017, there were approximately $25.8 million and $24.0 million in lease receivables outstanding. Lease receivables are grouped within commercial business loans below. 

Consumer Loans. We make a variety of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. Consumer loans are underwritten based on the borrower’s income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. Our installment loans generally amortize over periods up to 72 months. Although we typically require monthly payments of interest and a portion of the principal on our loan products, we will offer consumer loans with a single maturity date when a specific source of repayment is available. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value than real estate.

21

Loans receivable, net at June 30, 2018 and December 31, 2017 are summarized by category as follows:

	At June 30,					At December 31,
	2018					2017
			% of Total					% of Total
All Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	699,435		28.82	%		665,774		28.70	%
Home equity		87,946		3.62	%		90,141		3.89	%
Commercial real estate		940,558		38.75	%		933,820		40.26	%
Construction and development		327,778		13.50	%		294,793		12.71	%
Consumer loans		16,041		0.66	%		19,990		0.86	%
Commercial business loans		355,463		14.65	%		315,010		13.58	%
Total gross loans receivable		2,427,221		100.00	%		2,319,528		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,414,234					2,308,050

Loans receivable, net at June 30, 2018 and December 31, 2017 for purchased non-credit impaired loans and nonacquired loans are summarized by category as follows:

	At June 30,					At December 31,
	2018					2017
Purchased Non-Credit Impaired Loans			% of Total					% of Total
(ASC 310-20) and Nonacquired Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	689,934		29.20	%		654,597		29.21	%
Home equity		87,855		3.72	%		89,961		4.01	%
Commercial real estate		901,372		38.15	%		891,469		39.77	%
Construction and development		320,902		13.58	%		287,437		12.83	%
Consumer loans		15,963		0.68	%		19,895		0.89	%
Commercial business loans		346,677		14.67	%		297,754		13.29	%
Total gross loans receivable		2,362,703		100.00	%		2,241,113		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,349,716					2,229,635

22

Loans receivable, net at June 30, 2018 for purchased credit impaired loans are summarized by category below.

	At June 30,					At December 31,
	2018					2017
Purchased Credit Impaired			% of Total					% of Total
Loans (ASC 310-30):	Amount		Loans			Amount		Loans
	(Dollars in thousands)					(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	9,501		14.73	%		11,177		14.25	%
Home equity		91		0.14	%		180		0.23	%
Commercial real estate		39,186		60.14	%		42,351		54.01	%
Construction and development		6,876		10.66	%		7,356		9.38	%
Consumer loans		78		0.11	%		95		0.12	%
Commercial business loans		8,786		13.62	%		17,256		22.01	%
Total gross loans receivable		64,518		100.00	%		78,415		100.00	%
Less:
Allowance for loan losses		—					—
Total loans receivable, net	$	64,518					78,415

Included in the loan totals, net of purchase discount, were $813.7 million and $962.3 million in loans acquired through acquisitions at June 30, 2018 and December 31, 2017, respectively. At June 30, 2018 and December 31, 2017, the purchase discount on purchased non-credit impaired loans was $13.9 million and $17.7 million, respectively. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk. 

There are two methods to account for acquired loans as part of a business combination. Acquired loans that contain evidence of credit deterioration on the date of purchase are carried at the net present value of expected future proceeds in accordance with ASC 310-30 and are considered purchased credit impaired (“PCI”) loans. All other acquired loans are recorded at their initial fair value, adjusted for subsequent advances, pay downs, amortization or accretion of any premium or discount on purchase, charge-offs and any other adjustment to carrying value in accordance with ASC 310-20. 

PCI loans are aggregated into pools of loans based on common risk characteristics such as the type of loan, payment status, or collateral type. The Company estimates the amount and timing of expected cash flows for each purchased loan pool and the expected cash flows in excess of the amount paid are recorded as interest income over the remaining life of the pool (accretable yield). The excess of the pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). 

Over the life of the loan pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income. 

At June 30, 2018, the outstanding balance and recorded investment of PCI loans was $79.3 million and $64.5 million, respectively. At December 31, 2017, the outstanding balance and recorded investment of PCI loans was $93.8 million and $78.4 million, respectively,

23

The following table presents changes in the value of PCI loans receivable for the three and six months ended June 30, 2018:

	For the Three Months		For the Six Months
	Ended June 30, 2018		Ended June 30, 2018
	(In thousands)		(In thousands)
Balance at beginning of period	$	71,030	$	78,415
Net reductions for payments, foreclosures, and accretion		6,512		13,897
Balance at end of period	$	64,518	$	64,518

The following table presents changes in the value of the accretable yield for PCI loans for the three and six months ended June 30, 2018 (in thousands):

	For the Three Months			For the Six Months
	Ended June 30, 2018			Ended June 30, 2018
	(In thousands)			(In thousands)
Accretable yield, beginning of period	$	15,745		$	12,536
Additions		—			—
Accretion		(1,224	)		(2,556	)
Reclassification from nonaccretable balance, net		207			3,403
Other changes, net		(58	)		1,287
Accretable yield, end of period	$	14,670		$	14,670

The composition of gross loans outstanding, net of undisbursed amounts, by rate type is as follows:

	At June 30,				At December 31,
	2018				2017
	(Dollars in thousands)
Variable rate loans	$	914,923	37.69	%		807,748	34.82	%
Fixed rate loans		1,512,298	62.31	%		1,511,780	65.18	%
Total loans outstanding	$	2,427,221	100.00	%		2,319,528	100.00	%

24

The following table presents activity in the allowance for loan losses for the period indicated. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Allowance for loan losses:		For the Three Months Ended June 30, 2018
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	3,010			226			4,144			2,032			75			2,873			348			12,708
Provision for loan losses			240			(24	)		205			49			153			(309	)		246			559
Charge-offs			(147	)		—			(52	)		—			(129	)		(27	)		—			(355	)
Recoveries			7			—			42			1			18			6			—			74
Balance, end of period		$	3,110			202			4,339			2,082			117			2,543			594			12,987
		For the Three Months Ended June 30, 2017
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	2,506			236			3,613			943			110			2,498			809			10,715
Provision for loan losses			237			(18	)		(283	)		4			(16	)		359			(283	)		—
Charge-offs			(19	)		—			—			—			(1	)		—			—			(20	)
Recoveries			1			—			1			1			8			44			—			55
Balance, end of period		$	2,725			218			3,331			948			101			2,901			526			10,750
Allowance for loan losses:		For the Six Months Ended June 30, 2018
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	2,719			168			3,986			1,201			79			2,840			485			11,478
Provision for loan losses			526			26			392			(155	)		118			(456	)		109			559
Charge-offs			(147	)		—			(86	)		(1	)		(138	)		(116	)		—			(488	)
Recoveries			12			8			47			1,037			58			275			—			1,437
Balance, end of period		$	3,110			202			4,339			2,082			117			2,543			594			12,987
		For the Six Months Ended June 30, 2017
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
	(In thousands)
Balance, beginning of period		$	2,636			197			3,344			1,132			80			2,805			494			10,688
Provision for loan losses			122			21			(39	)		(186	)		20			30			32			—
Charge-offs			(35	)		—			—			—			(10	)		—			—			(45	)
Recoveries			2			—			26			2			11			66			—			107
Balance, end of period		$	2,725			218			3,331			948			101			2,901			526			10,750

25

The following table disaggregates our allowance for loan losses and recorded investment in loans by impairment methodology.

	Loans Secured by Real Estate
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
	family		equity		estate		development		Consumer		business		Unallocated		Total
	(In thousands)
At June 30, 2018:
Allowance for loan losses  ending balances:
Individually evaluated for impairment	$	204		29		142		534		—		11		—		920
Collectively evaluated for impairment		2,906		173		4,197		1,548		117		2,532		594		12,067
	$	3,110		202		4,339		2,082		117		2,543		594		12,987
Loans receivable ending balances:
Individually evaluated for impairment	$	3,698		126		4,636		1,840		19		754		—		11,073
Collectively evaluated for impairment		686,236		87,729		896,736		319,062		15,944		345,923		—		2,351,630
Purchased Credit-Impaired Loans		9,501		91		39,186		6,876		78		8,786		—		64,518
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		—		2,427,221
At December 31, 2017:
Allowance for loan losses ending balances:
Individually evaluated for impairment	$	64		29		—		—		—		16		—		109
Collectively evaluated for impairment		2,655		139		3,986		1,201		79		2,824		485		11,369
	$	2,719		168		3,986		1,201		79		2,840		485		11,478
Loans receivable ending balances:
Individually evaluated for impairment	$	3,435		108		4,811		318		26		285		—		8,983
Collectively evaluated for impairment		651,162		89,853		886,658		287,119		19,869		297,469		—		2,232,130
Purchased Credit-Impaired Loans		11,177		180		42,351		7,356		95		17,256		—		78,415
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		—		2,319,528

26

The following table presents impaired loans individually evaluated for impairment in the segmented portfolio categories and the corresponding allowance for loan losses as of June 30, 2018 and December 31, 2017. The recorded investment is defined as the original amount of the loan, net of any deferred costs and fees, less any principal reductions and direct charge-offs. Unpaid principal balance includes amounts previously included in charge-offs.

	At June 30, 2018						At December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
					(In thousands)
With no related allowance recorded:
Loans secured by real estate:
One-to-four family	$	2,250		2,375		—		2,725		2,846		—
Home equity		68		68		—		—		—		—
Commercial real estate		2,824		2,824		—		3,370		3,370		—
Construction and development		267		267		—		318		318		—
Consumer loans		19		19		—		26		26		—
Commercial business loans		599		599		—		113		114		—
		6,027		6,152		—		6,552		6,674		—
With an allowance recorded:
Loans secured by real estate:
One-to-four family		1,448		1,486		204		710		710		64
Home equity		58		58		29		108		108		29
Commercial real estate		1,812		1,894		142		1,441		1,441		—
Construction and development		1,573		1,573		534		—		—		—
Consumer loans		—		—		—		—		—		—
Commercial business loans		155		155		11		172		172		16
		5,046		5,166		920		2,431		2,431		109
Total:
Loans secured by real estate:
One-to-four family		3,698		3,861		204		3,435		3,556		64
Home equity		126		126		29		108		108		29
Commercial real estate		4,636		4,718		142		4,811		4,811		—
Construction and development		1,840		1,840		534		318		318		—
Consumer loans		19		19		—		26		26		—
Commercial business loans		754		754		11		285		286		16
	$	11,073		11,318		920		8,983		9,105		109

27

The following table presents the average recorded investment and interest income recognized on impaired loans individually evaluated for impairment in the segmented portfolio categories for the three and six months ended June 30, 2018 and 2017.

	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2018					2017					2018					2017
	Average		Interest			Average		Interest			Average		Interest			Average		Interest
	Recorded		Income			Recorded		Income			Recorded		Income			Recorded		Income
	Investment		Recognized			Investment		Recognized			Investment		Recognized			Investment		Recognized
	(In thousands)
With no related allowance recorded:
Loans secured by real estate:
One-to-four family	$	2,199		(14	)		3,027		(15	)		2,107		2			2,953		21
Home equity		17		—			347		9			8		1			258		12
Commercial real estate		2,971		(31	)		4,016		(37	)		3,012		49			4,043		98
Construction and development		267		5			158		8			267		9			87		8
Consumer loans		20		—			19		—			21		—			19		—
Commercial business loans		183		9			32		(16	)		103		14			35		1
		5,657		(31	)		7,599		(51	)		5,518		75			7,395		140
With an allowance recorded:
Loans secured by real estate:
One-to-four family		1,481		5			992		5			1,489		16			803		8
Home equity		88		(3	)		274		(2	)		96		—			233		(1	)
Commercial real estate		1,839		18			1,009		(67	)		1,793		39			1,014		—
Construction and development		1,447		—			—		—			922		(4	)		—		—
Consumer loans		—					—		—			—		—			—		—
Commercial business loans		159		2			205		—			164		5			211		6
		5,014		22			2,480		(64	)		4,464		56			2,261		13
Total:
Loans secured by real estate:
One-to-four family		3,680		(9	)		4,019		(10	)		3,596		18			3,756		29
Home equity		105		(3	)		621		7			104		1			491		11
Commercial real estate		4,810		(13	)		5,025		(104	)		4,805		88			5,057		98
Construction and development		1,714		5			158		8			1,189		5			87		8
Consumer loans		20		—			19		—			21		—			19		—
Commercial business loans		342		11			237		(16	)		267		19			246		7
	$	10,671		(9	)		10,079		(115	)		9,982		131			9,656		153

28

A loan is considered past due if the required principal and interest payment has not been received as of the due date. The following schedule is an aging of past due loans receivable by portfolio segment as of June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
All Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	1,343		567		918		274		239		327		3,668
60-89 days past due		870		164		1,411		52		23		119		2,639
90 days or more past due		2,997		215		611		989		23		750		5,585
Total past due		5,210		946		2,940		1,315		285		1,196		11,892
Current		694,225		87,000		937,618		326,463		15,756		354,267		2,415,329
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221
	At June 30, 2018
Purchased Non-Credit	Real Estate Loans
Impaired Loans (ASC 310-20) and Nonacquired Loans:	One-to- four family		Home equity		Commercial real estate		Construction and development		Consumer		Commercial business		Total
	(In thousands)
30-59 days past due	$	1,264		556		826		274		239		327		3,486
60-89 days past due		798		164		1,411		41		23		119		2,556
90 days or more past due		2,582		210		611		87		23		750		4,263
Total past due		4,644		930		2,848		402		285		1,196		10,305
Current		685,290		86,925		898,524		320,500		15,678		345,481		2,352,398
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
	At June 30, 2018
	Real Estate Loans
Purchased Credit Impaired Loans (ASC 310-30):	One-to- four family		Home equity		Commercial real estate		Construction and development		Consumer		Commercial business		Total
	(In thousands)
30-59 days past due	$	79		11		92		—		—		—		182
60-89 days past due		72		—		—		11		—		—		83
90 days or more past due		415		5		—		902		—		—		1,322
Total past due		566		16		92		913		—		—		1,587
Current		8,935		75		39,094		5,963		78		8,786		62,931
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518

29

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
All Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	8,139		1,350		1,358		2,328		108		366		13,649
60-89 days past due		1,025		109		421		—		129		185		1,869
90 days or more past due		2,580		117		689		2,482		21		59		5,948
Total past due		11,744		1,576		2,468		4,810		258		610		21,466
Current		654,030		88,565		931,352		289,983		19,732		314,400		2,298,062
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
	At December 31, 2017
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonpurchased Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	7,874		1,319		1,112		2,315		108		366		13,094
60-89 days past due		1,000		109		421		—		129		185		1,844
90 days or more past due		1,894		108		689		1,297		21		59		4,068
Total past due		10,768		1,536		2,222		3,612		258		610		19,006
Current		643,829		88,425		889,247		283,825		19,637		297,144		2,222,107
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113
	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	265		31		246		13		—		—		555
60-89 days past due		25		—		—		—		—		—		25
90 days or more past due		686		9		—		1,185		—		—		1,880
Total past due		976		40		246		1,198		—		—		2,460
Current		10,201		140		42,105		6,158		95		17,256		75,955
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415

Loans are generally placed in nonaccrual status when the collection of principal and interest is 90 days or more past due, unless the obligation is both well-secured and in the process of collection. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest payments received while the loan is on nonaccrual are applied to the principal balance. No interest income was recognized on impaired loans subsequent to the nonaccrual status designation. A loan is returned to accrual status when the borrower makes consistent payments according to contractual terms and future payments are reasonably assured.

30

The following is a schedule of loans receivable, by portfolio segment, on nonaccrual at June 30, 2018 and December 31, 2017.

	At June 30,		At December 31,
	2018		2017
Loans secured by real estate:	(In thousands)
One-to-four family	$	2,909		1,927
Home equity		231		108
Commercial real estate		2,710		1,540
Construction and development		1,661		51
Consumer loans		100		22
Commercial business loans		812		313
	$	8,423		3,961

The Company uses several metrics as credit quality indicators of current or potential risks as part of the ongoing monitoring of credit quality of its loan portfolio. The credit quality indicators are periodically reviewed and updated on a case-by-case basis. The Company uses the following definitions for the internal risk rating grades, listed from the least risk to the highest risk.

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 Company 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 Company uses the following definitions in the tables below: 

Nonperforming: Loans on nonaccrual status plus loans greater than 90 days past due still accruing interest.

Performing: All current accrual loans plus loans less than 90 days past due.

31

The following is a schedule of the credit quality of loans receivable, by portfolio segment, as of June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
Total Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	694,822		87,754		915,661		321,280		15,838		348,154		2,383,509
Special Mention		877		7		17,605		3,280		103		4,970		26,842
Substandard		3,736		185		7,292		3,218		100		2,339		16,870
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221
Performing	$	696,111		87,710		937,848		325,215		15,922		354,651		2,417,457
Nonperforming:
90 days past due still accruing		415		5		—		902		19		—		1,341
Nonaccrual		2,909		231		2,710		1,661		100		812		8,423
Total nonperforming		3,324		236		2,710		2,563		119		812		9,764
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221

32

	At June 30, 2018
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonacquired Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	687,208		87,692		892,865		319,206		15,760		341,870		2,344,601
Special Mention		—		—		4,980		74		103		3,945		9,102
Substandard		2,726		163		3,527		1,622		100		862		9,000
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
Performing	$	687,025		87,624		898,662		319,241		15,844		345,865		2,354,261
Nonperforming:
90 days past due still accruing		—		—		—		—		19		—		19
Nonaccrual		2,909		231		2,710		1,661		100		812		8,423
Total nonperforming		2,909		231		2,710		1,661		119		812		8,442
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	7,614		62		22,796		2,074		78		6,284		38,908
Special Mention		877		7		12,625		3,206		—		1,025		17,740
Substandard		1,010		22		3,765		1,596		—		1,477		7,870
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518
Performing	$	9,086		86		39,186		5,974		78		8,786		63,196
Nonperforming:
90 days past due still accruing		415		5		—		902		—		—		1,322
Nonaccrual		—		—		—		—		—		—		—
Total nonperforming		415		—		—		—		—		—		1,322
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518

33

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
Total Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	658,031		89,919		898,328		287,491		19,817		296,038		2,249,624
Special Mention		4,086		30		28,670		4,201		35		12,339		49,361
Substandard		3,657		192		6,822		3,101		138		6,633		20,543
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
Performing	$	663,161		90,024		932,280		293,557		19,968		314,697		2,313,687
Nonperforming:
90 days past due still accruing		686		9		—		1,185		—		—		1,880
Nonaccrual		1,927		108		1,540		51		22		313		3,961
Total nonperforming		2,613		117		1,540		1,236		22		313		5,841
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
	At December 31, 2017
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonpurchased Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	652,508		89,853		887,458		286,857		19,785		295,470		2,231,931
Special Mention		—		—		2,526		79		—		2,067		4,672
Substandard		2,089		108		1,485		501		110		217		4,510
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113
Performing	$	652,670		89,853		889,929		287,386		19,873		297,441		2,237,152
Nonperforming:
90 days past due still accruing		—		—		—		—		—		—		—
Nonaccrual		1,927		108		1,540		51		22		313		3,961
Total nonperforming		1,927		108		1,540		51		22		313		3,961
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113

34

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	5,523		66		10,870		634		32		568		17,693
Special Mention		4,086		30		26,144		4,122		35		10,272		44,689
Substandard		1,568		84		5,337		2,600		28		6,416		16,033
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415
Performing	$	10,491		171		42,351		6,171		95		17,256		76,535
Nonperforming:
90 days past due still accruing		686		9		—		1,185		—		—		1,880
Nonaccrual		—		—		—		—		—		—		—
Total nonperforming		686		9		—		1,185		—		—		1,880
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

Troubled Debt Restructurings 

At June 30, 2018, there were $6.3 million in loans designated as troubled debt restructurings of which $5.0 million were accruing. At June 30, 2017, there were $6.7 million in loans designated as troubled debt restructurings of which $5.5 million were accruing. At December 31, 2017, there were $6.5 million in loans designated as troubled debt restructurings of which $5.3 million were accruing. 

There was one loan with a premodification and post modification balance of $135,000 identified as a troubled debt restructuring during the six months ended June 30, 2018 due to an interest rate change. There were two loans with a premodification and post modification balance of $608,000 identified as troubled debt restructurings during the six months ended June 30, 2017 due to interest rate changes.

No loans previously restructured in the twelve months prior to June 30, 2018 and 2017 went into default during the three and six months ended June 30, 2018 and 2017. 

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NOTE 6 – REAL ESTATE ACQUIRED THROUGH FORECLOSURE

The following presents summarized activity in real estate acquired through foreclosure for the periods ended June 30, 2018 and December 31, 2017:

	At June 30,			At December 31,
	2018			2017
	(In thousands)
Balance at beginning of period	$	3,106			1,179
Additions		91			2,554
Sales		(1,345	)		(627	)
Write downs		(126	)		—
Balance at end of period	$	1,726			3,106

A summary of the composition of real estate acquired through foreclosure follows:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Real estate loans:
One-to-four family	$	433		709
Construction and development		1,293		2,397
	$	1,726	$	3,106

NOTE 7 - DEPOSITS

Deposits outstanding by type of account at June 30, 2018 and December 31, 2017 are summarized as follows:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing demand accounts	$	577,568		525,615
Interest-bearing demand accounts		584,719		551,308
Savings accounts		198,571		213,142
Money market accounts		458,558		452,734
Certificates of deposit:
Less than $250,000		788,693		755,887
$250,000 or more		100,689		106,243
Total certificates of deposit		889,382		862,130
Total deposits	$	2,708,798		2,604,929

The aggregate amount of brokered certificates of deposit was $110.5 million and $99.2 million at June 30, 2018 and December 31, 2017, respectively. Brokered certificates of deposit are included in the table above under certificates of deposit less than $250,000. The aggregate amount of institutional certificates of deposit was $57.1 million and $39.1 million at June 30, 2018 and December 31, 2017, respectively. 

NOTE 8 – ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Current accounting literature requires disclosures about the fair value of all financial instruments whether or not recognized in the balance sheet, for which it is practicable to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized through immediate settlement of the instrument.

36

The fair value of a financial instrument is an amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced sale. Fair values are estimated at a specific point in time based on relevant market information and information about the financial instruments. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. 

The Company has used management’s best estimate of fair value based on the above assumptions. Thus the fair values presented may not be the amounts that could be realized in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement are not taken into consideration in the fair values presented. 

The Company determines the fair value of its financial instruments based on the fair value hierarchy established under ASC 820-10, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the financial instrument’s fair value measurement in its entirety. There are three levels of inputs that may be used to measure fair value. The three levels of inputs of the valuation hierarchy are defined below: 

Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities for the instrument or security to be valued. Level 1 assets include marketable equity securities as well as U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or model-based valuation techniques for which all significant assumptions are derived principally from or corroborated by observable market data. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined by using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. U.S. Government sponsored agency securities, mortgage-backed securities issued by U.S. Government sponsored enterprises and agencies, obligations of states and municipalities, collateralized mortgage obligations issued by U.S. Government sponsored enterprises, and mortgage loans held-for-sale are generally included in this category. Certain private equity investments that invest in publicly traded companies are also considered Level 2 assets.

Level 3 Unobservable inputs that are supported by little, if any, market activity for the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow models and similar techniques, and may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. These methods of valuation may result in a significant portion of the fair value being derived from unobservable assumptions that reflect The Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. This category primarily includes collateral-dependent impaired loans, other real estate, certain equity investments, and certain private equity investments.

The following is a description of the fair value methodologies used for financial assets and liabilities.

37

Assets and liabilities measured at fair value on a recurring basis are as follows as of June 30, 2018 and December 31, 2017:

	Quoted market		Significant other		Significant other
	price in active		observable inputs		unobservable inputs
	markets (Level 1)		(Level 2)		(Level 3)
	(In thousands)
June 30, 2018
Available-for-sale investment securities:
Municipal securities	$	—		201,577		—
US government agencies		—		12,945		—
Collateralized loan obligations		—		172,508		—
Corporate securities		—		6,989		—
Mortgage-backed securities:
Agency		—		233,757		—
Non-agency		—		165,884		—
Trust Preferred Securities		—		—		11,308
Loans held for sale		—		39,473		—
Derivative assets:
Cash flow hedges:
Interest rate swaps		2,007		—		—
Non-hedging derivatives:
Interest rate swaps		2,007		—		—
Mortgage loan interest rate lock commitments		—		1,476		—
Mortgage loan forward sales commitments		—		511		—
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		—		—		—
Mortgage-backed securities forward sales commitments		—		129		—
Total	$	4,014		835,249		11,308
December 31, 2017
Available-for-sale investment securities:
Municipal securities	$	—		247,350		—
US government agencies		—		12,008		—
Collateralized loan obligations		—		128,643		—
Corporate securities		—		7,006		—
Mortgage-backed securities:
Agency		—		243,595		—
Non-agency		—		95,125		—
Trust preferred securities		—		—		9,512
Loans held for sale		—		35,292		—
Derivative assets:
Cash flow hedges:
Interest rate swaps		644		—		—
Non-hedging derivatives:
Interest rate swaps		964		—		—
Mortgage loan interest rate lock commitments		—		890		—
Mortgage loan forward sales commitments		—		305		—
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		95		—		—
Mortgage-backed securities forward sales commitments		—		61		—
Total	$	1,703		770,275		9,512

38

Securities Available-for-Sale 

Fair values for investment securities available-for-sale are measured on a recurring basis upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for prepayment assumptions, projected credit losses, and liquidity. At June 30, 2018 and December 31, 2017, the Company’s investment securities available-for-sale are recurring Level 2 except for trust preferred securities which are determined to be Level 3. 

Mortgage Loans Held for Sale

Mortgage loans held for sale are recorded at either fair value, if elected, or the lower of cost or fair value on an individual loan basis on a recurring basis. Origination fees and costs for loans held for sale recorded at lower of cost or market are capitalized in the basis of the loan and are included in the calculation of realized gains and losses upon sale. Origination fees and costs are recognized in earnings at the time of origination for loans held for sale that are recorded at fair value. Fair value is derived from observable current market prices, when available, and includes loan servicing value. When observable market prices are not available, the Company uses judgment and estimates fair value using internal models, in which the Company uses its best estimates of assumptions it believes would be used by market participants in estimating fair value. Mortgage loans held for sale are classified within Level 2 of the valuation hierarchy.

Derivative Assets and Liabilities 

Fair values for derivative assets and liabilities are measured on a recurring basis. The primary use of derivative instruments is related to the mortgage banking activities of the Company. The Company’s wholesale mortgage banking subsidiary enters into interest rate lock commitments related to expected funding of residential mortgage loans at specified times in the future. Interest rate lock commitments that relate to the origination of mortgage loans that will be held-for-sale are considered derivative instruments under applicable accounting guidance. As such, the Company records its interest rate lock commitments and forward loan sales commitments at fair value, determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, the mortgage subsidiary enters into contractual interest rate lock commitments to extend credit, if approved, at a fixed interest rate and with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within the time frames established by the mortgage banking subsidiary. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing interest rate lock commitments to borrowers, the mortgage banking subsidiary enters into best efforts forward sales contracts with third party investors. The forward sales contracts lock in a price for the sale of loans similar to the specific interest rate lock commitments. Both the interest rate lock commitments to the borrowers and the forward sales contracts to the investors that extend through to the date the loan may close are derivatives, and accordingly, are marked to fair value through earnings. In estimating the fair value of an interest rate lock commitment, the Company assigns a probability to the interest rate lock commitment based on an expectation that it will be exercised and the loan will be funded. The fair value of the interest rate lock commitment is derived from the fair value of related mortgage loans, which is based on observable market data and includes the expected net future cash flows related to servicing of the loans. The fair value of the interest rate lock commitment is also derived from inputs that include guarantee fees negotiated with the agencies and private investors, buy-up and buy-down values provided by the agencies and private investors, and interest rate spreads for the difference between retail and wholesale mortgage rates. The Company also applies fall-out ratio assumptions for those interest rate lock commitments for which we do not close a mortgage loan. The fall-out ratio assumptions are based on the mortgage subsidiary’s historical experience, conversion ratios for similar loan commitments, and market conditions. While fall-out tendencies are not exact predictions of which loans will or will not close, historical performance review of loan-level data provides the basis for determining the appropriate hedge ratios. In addition, on a periodic basis, the mortgage banking subsidiary performs analysis of actual rate lock fall-out experience to determine the sensitivity of the mortgage pipeline to interest rate changes from the date of the commitment through loan origination, and then period end, using applicable published mortgage-backed investment security prices. The expected fall-out ratios (or conversely the “pull-through” percentages) are applied to the determined fair value of the unclosed mortgage pipeline in accordance with GAAP. Changes to the fair value of interest rate lock commitments are recognized based on interest rate changes, changes in the probability that the commitment will be exercised, and the passage of time. The fair value of the forward sales contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date. These instruments are defined as Level 2 within the valuation hierarchy.

39

Derivative instruments not related to mortgage banking activities include interest rate swap agreements. Fair values for these instruments are based on quoted market prices, when available. As such, the fair value adjustments for derivatives with fair values based on quoted market prices in an active market are recurring Level 1.

Assets measured at fair value on a nonrecurring basis are as follows as of June 30, 2018 and December 31, 2017:

	Quoted market price		Significant other		Significant other
	in active markets		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)
	(In thousands)
June 30, 2018
Impaired loans:
Loans secured by real estate:
One-to-four family	$	—		—		3,494
Home equity		—		—		97
Commercial real estate		—		—		4,494
Construction and development		—		—		1,306
Consumer loans		—		—		19
Commercial business loans		—		—		743
Real estate owned:
One-to-four family		—		—		433
Construction and development		—		—		1,293
Mortgage servicing rights		—		—		29,890
Total	$	—		—		41,769
December 31, 2017
Impaired loans:
Loans secured by real estate:
One-to-four family	$	—		—		3,371
Home equity		—		—		79
Commercial real estate		—		—		4,811
Construction and development		—		—		318
Consumer loans		—		—		26
Commercial business loans		—		—		269
Real estate owned:
One-to-four family		—		—		709
Construction and development		—		—		2,397
Mortgage servicing rights		—		—		26,255
Total	$	—		—		38,235

40

For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2018 and December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

	June 30, 2018 and December 31, 2017
		Significant	Significant Unobservable
	Valuation Technique	Observable Inputs	Inputs
Impaired Loans	Appraisal Value	Appraisals and or sales of comparable properties	Appraisals discounted 10% to 20% for sales commissions and other holding costs
Real Estate Owned	Appraisal Value/ Comparison Sales	Appraisals and or sales of comparable properties	Appraisals discounted 10% to 20% for sales commissions and other holding costs
Mortgage Servicing Rights	Discounted cash flows	Comparable sales	Discount rates averaging 11.5% - 13% in each period presented Prepayment rates averaging 6% - 8.5% in 2018 Prepayment rates averaging 8% - 10% in 2017

Impaired Loans

Loans that are considered impaired are recorded at fair value on a nonrecurring basis. Once a loan is considered impaired, the fair value is measured using one of several methods, including collateral liquidation value, market value of similar debt and discounted cash flows. Those impaired loans not requiring a specific charge against the allowance represent loans for which the fair value of the expected repayments or collateral meet or exceed the recorded investment in the loan. Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the fair value of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which the Company considers to be Level 3 inputs.

Other Real Estate Owned (“OREO”)

OREO is carried at the lower of carrying value or fair value on a nonrecurring basis.  Fair value is based upon independent appraisals or management’s estimation of the collateral and is considered a Level 3 measurement.  When the OREO value is based upon a current appraisal or when a current appraisal is not available or there is estimated further impairment, the measurement is considered a Level 3 measurement.

Mortgage Servicing Rights

A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“mortgage servicing rights”) at fair value, if practicable. For subsequent measurement purposes, the Company measures servicing assets and liabilities based on the lower of cost or market on a quarterly basis on a nonrecurring basis. The quarterly determination of fair value of servicing rights is provided by a third party and is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

41

The carrying amount and estimated fair value of the Company’s financial instruments at June 30, 2018 and December 31, 2017 are as follows:

	At June 30, 2018
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Financial assets:	(In thousands)
Cash and due from banks	$	27,327		27,327		27,327		—		—
Interest-bearing cash		54,751		54,751		54,751		—		—
Securities available-for-sale		804,968		804,968		—		793,660		11,308
Federal Home Loan Bank stock		19,019		19,019		—		—		19,019
Other investments		3,429		3,429		—		—		3,429
Derivative assets		6,001		6,001		4,014		1,987		—
Loans held for sale		39,473		39,473		—		39,473		—
Loans receivable, net		2,414,234		2,422,163		—		—		2,422,163
Accrued interest receivable		12,664		12,664		—		12,664		—
Real estate acquired through foreclosure		1,726		1,726		—		—		1,726
Mortgage servicing rights		23,626		29,890		—		—		29,890
Financial liabilities:
Deposits		2,708,798		2,712,165		—		2,712,165		—
Short-term borrowed funds		354,500		354,595		—		354,595		—
Long-term debt		46,347		46,002		—		46,002		—
Derivative liabilities		129		129		—		129		—
Drafts outstanding		10,454		10,454		—		10,454		—
Advances from borrowers for insurance and taxes		4,558		4,558		—		4,558		—
Accrued interest payable		1,560		1,560		—		1,560		—
Dividends payable to stockholders		1,354		1,354		—		1,354		—

42

	At December 31, 2017
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Financial assets:	(In thousands)
Cash and due from banks	$	25,254		25,254		25,254		—		—
Interest-bearing cash		55,998		55,998		55,998		—		—
Securities available-for-sale		743,239		743,239		—		733,727		9,512
Federal Home Loan Bank stock		19,065		19,065		—		—		19,065
Other investments		3,446		3,446		—		—		3,446
Derivative assets		2,803		2,803		1,608		1,195		—
Loans held for sale		35,292		35,292		—		35,292		—
Loans receivable, net		2,308,050		2,311,088		—		—		2,311,088
Accrued interest receivable		11,992		11,992				11,992
Real estate acquired through foreclosure		3,106		3,106		—		—		3,106
Mortgage servicing rights		21,003		26,255		—		—		26,255
Financial liabilities:
Deposits		2,604,929		2,597,526		—		2,597,526		—
Short-term borrowed funds		340,500		339,870		—		339,870		—
Long-term debt		72,259		71,859		—		71,859		—
Derivative liabilities		156		156		95		61		—
Drafts outstanding		7,324		7,324		—		7,324		—
Advances from borrowers for insurance and taxes		3,005		3,005		—		3,005		—
Accrued interest payable		1,126		1,126		—		1,126		—
Dividends payable to stockholders		1,051		1,051		—		1,051		—

	At June 30, 2018				At December 31, 2017
	Notional		Estimated		Notional		Estimated
	Amount		Fair Value		Amount		Fair Value
Off-Balance Sheet Financial Instruments:	(In thousands)
Commitments to extend credit	$	378,608		—		422,065		—
Standby letters of credit		14,329		—		4,449		—

In determining appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to fair value disclosures. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

Cash and due from banks

The carrying amounts of these financial instruments approximate fair value. All mature within 90 days and present no anticipated credit concerns.

Interest-bearing cash

The carrying amount of these financial instruments approximates fair value. 

FHLB stock and other investments

The carrying amount of these financial instruments approximates fair value.

43

Loans receivable

During the first quarter of 2018, the Company adopted ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities.” The amendments included within this standard, which are applied prospectively, require the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using an exit price notion. Prior to adopting the amendments included in the standard, the Company was allowed to measure fair value under an entry price notion. The entry price notion previously applied by the Company used a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument. The exit price notion uses the same approach, but also incorporates other factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets.

As of June 30, 2018, the technique used by the Company to estimate the exit price of the loan portfolio consists of similar procedures to those used as of December 31, 2017, but with added emphasis on both illiquidity risk and credit risk not captured by the previously applied entry price notion. The fair value of the Company’s loan portfolio has always included a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk as described above. However, under the new guidance, the Company believes a further credit risk discount must be applied through the use of a discounted cash flow model to compensate for illiquidity risk, based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan. This consideration of enhanced credit risk provides an estimated exit price for the Company’s loan portfolio.

For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral.

As of December 31, 2017, the fair value of the Company’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality. The values derived from the discounted cash flow approach for each of the above portfolios are then further discounted to incorporate credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price as of December 31, 2017. Loans receivable are classified within Level 3 of the valuation hierarchy. 

Accrued interest receivable

The carrying value approximates the fair value. 

Deposits

The estimated fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The estimated fair value of fixed maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. 

Short-term borrowed funds

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within 90 days approximate their fair values. Estimated fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. 

44

Long-term debt

The estimated fair values of the Company’s long-term debt are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. 

Drafts outstanding, advances from borrowers for insurance and taxes and dividends payable to stockholders

The carrying value approximates the fair value.

Accrued interest payable

The fair value approximates the carrying value.

Commitments to extend credit

The carrying amounts of these commitments are considered to be a reasonable estimate of fair value because the commitments underlying interest rates are generally based upon current market rates.

Off-balance sheet financial instruments

Contract values and fair values for off-balance sheet, credit-related financial instruments are based on estimated fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and counterparties’ credit standing.

NOTE 9 - EARNINGS PER SHARE

Basic earnings per share (“EPS”) represents income available to common stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects additional shares that would have been outstanding if dilutive potential shares had been issued. Potential shares that may be issued by the Company relate solely to outstanding stock options, restricted stock (non-vested shares), restricted stock units (“RSUs”) and warrants, and are determined using the treasury stock method. Under the treasury stock method, the number of incremental shares is determined by assuming the issuance of stock for the outstanding stock options, unvested restricted stock and RSUs, and warrants, reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price for the period of the Company’s stock.

The following is a summary of the reconciliation of weighted average shares outstanding for the three and six months ended June 30, 2018 and 2017:

	For the Three Months Ended June 30,
	2018				2017
	Basic		Diluted		Basic		Diluted
Weighted average shares outstanding		21,243,094		21,243,094		16,029,332		16,029,332
Effect of dilutive securities		—		210,945		—		150,839
Weighted average shares outstanding		21,243,094		21,454,039		16,029,332		16,180,171
	For the Six Months Ended June 30,
	2018				2017
	Basic		Diluted		Basic		Diluted
Weighted average shares outstanding		20,961,182		20,961,182		14,980,349		14,980,349
Effect of dilutive securities		—		213,754		—		164,447
Weighted average shares outstanding		20,961,182		21,174,936		14,980,349		15,144,796

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The following is a summary of the reconciliation of shares issued and outstanding and unvested restricted stock awards as of June 30, 2018 and 2017 used to calculate book value per share:

	As of June 30,
	2018			2017
Issued and outstanding shares		22,570,182			16,156,943
Less nonvested restricted stock awards		(137,345	)		(101,489	)
Period end dilutive shares		22,432,837			16,055,454

NOTE 10 – SUPPLEMENTAL SEGMENT INFORMATION

The Company has three reportable segments: community banking, wholesale mortgage banking (“mortgage banking”) and other. The community banking segment includes traditional banking services offered through the Bank as well as the managerial and operational support provided by Carolina Services. The mortgage banking segment provides wholesale mortgage loan origination and servicing offered through Crescent Mortgage Company. The other segment includes parent company financial information and represents an overhead function rather than an operating segment. The parent company’s most significant assets are its net investments in its subsidiaries.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1. The Company evaluates performance based on net income.

The Company accounts for intersegment revenues and expenses as if the revenue/expense transactions were generated to third parties, that is, at current market prices.

The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each segment has different types and levels of credit and interest rate risk.

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The following tables present selected financial information for the Company’s reportable business segments for the three and six months ended June 30, 2018 and 2017:

	Community		Mortgage
For the Three Months Ended June 30, 2018	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	39,060		458		14			(55	)		39,477
Interest expense		6,066		77		506			(77	)		6,572
Net interest income (expense)		32,994		381		(492	)		22			32,905
Provision for loan losses		534		25		—			—			559
Noninterest income from external customers		5,570		5,434		23			—			11,027
Intersegment noninterest income		242		9		—			(251	)		—
Noninterest expense		19,348		4,748		275			—			24,371
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		18,924		811		(746	)		13			19,002
Income tax expense (benefit)		3,996		213		(178	)		5			4,036
Net income (loss)	$	14,928		598		(568	)		8			14,966
	Community		Mortgage
For the Three Months Ended June 30, 2017	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	21,691		427		8			(3	)		22,123
Interest expense		2,747		42		278			(42	)		3,025
Net interest income (expense)		18,944		385		(270	)		39			19,098
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		3,494		5,311		—			—			8,805
Intersegment noninterest income		242		31		—			(273	)		—
Noninterest expense		11,448		4,164		278			—			15,890
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		11,232		1,323		(550	)		8			12,013
Income tax expense (benefit)		2,789		85		(204	)		3			2,673
Net income (loss)	$	8,443		1,238		(346	)		5			9,340

47

	Community		Mortgage
For the Six Months Ended June 30, 2018	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	76,317		889		27			(79	)		77,154
Interest expense		11,150		130		968			(130	)		12,118
Net interest income (expense)		65,167		759		(941	)		51			65,036
Provision for loan losses		534		25		—			—			559
Noninterest income from external customers		10,630		10,358		88			—			21,076
Intersegment noninterest income		483		26		—			(509	)		—
Noninterest expense		52,278		9,137		554			1			61,970
Intersegment noninterest expense		—		480		3			(483	)		—
Income (loss) before income taxes		23,468		1,501		(1,410	)		24			23,583
Income tax expense (benefit)		4,556		341		(345	)		9			4,561
Net income (loss)	$	18,912		1,160		(1,065	)		15			19,022
	Community		Mortgage
For the Six Months June 30, 2017	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	38,949		822		13			8			39,792
Interest expense		4,965		54		459			(54	)		5,424
Net interest income (expense)		33,984		768		(446	)		62			34,368
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		5,912		10,123		—			—			16,035
Intersegment noninterest income		483		64		—			(547	)		—
Noninterest expense		22,772		8,216		488			—			31,476
Intersegment noninterest expense		—		480		3			(483	)		—
Income (loss) before income taxes		17,607		2,259		(937	)		(2	)		18,927
Income tax expense (benefit)		4,656		375		(346	)		(1	)		4,684
Net income (loss)	$	12,951		1,884		(591	)		(1	)		14,243

The following tables present selected financial information for the Company’s reportable business segments for June 30, 2018 and December 31, 2017: 

	Community		Mortgage
At June 30, 2018	Banking		Banking		Other		Eliminations			Total
					(In thousands)
Assets	$	3,690,507		83,258		584,455		(665,129	)		3,693,091
Loans receivable, net		2,397,896		31,385		—		(15,047	)		2,414,234
Loans held for sale		15,990		23,483		—		—			39,473
Deposits		2,718,920		—		—		(10,122	)		2,708,798
Borrowed funds		368,500		14,600		32,347		(14,600	)		400,847
	Community		Mortgage
At December 31, 2017	Banking		Banking		Other		Eliminations			Total
					(In thousands)
Assets	$	3,516,551		81,681		503,144		(582,359	)		3,519,017
Loans receivable, net		2,295,316		28,206		—		(15,472	)		2,308,050
Loans held for sale		5,999		29,293		—		—			35,292
Deposits		2,611,106		—		—		(6,177	)		2,604,929
Borrowed funds		380,500		15,000		32,259		(15,000	)		412,759

48

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. 

The following discussion reviews our results of operations for the three and six months ended June 30, 2018 as compared to the three and six months ended June 30, 2017 and assesses our financial condition as of June 30, 2018 as compared to December 31, 2017. You should read the following discussion and analysis in conjunction with the accompanying consolidated financial statements and the related notes and the consolidated financial statements and the related notes for the year ended December 31, 2017 included in our Form 10-K for that period. Results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018 or any future period.

Cautionary Warning Regarding Forward-Looking Statements 

This report, including information included or incorporated by reference in this report, contains statements which constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may relate to our financial condition, results of operation, plans, objectives, or future performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,” “should,” “will,” “expect,” “anticipate,” “predict,” “project,” “potential,” “believe,” “continue,” “assume,” “intend,” “plan,” and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements. Potential risks and uncertainties that could cause our actual results to differ from those anticipated in any forward-looking statements include, but are not limited to, the following: 

· our ability to maintain appropriate levels of capital and to comply with our capital ratio requirements;

· examinations by our regulatory authorities, including the possibility that the regulatory authorities may, among other things, require us to increase our allowance for loan losses or write-down assets or otherwise impose restrictions or conditions on our operations, including, but not limited to, our ability to acquire or be acquired;

· changes in economic conditions, either nationally or regionally and especially in our primary market areas, resulting in, among other things, a deterioration in credit quality;

· changes in interest rates, or changes in regulatory environment resulting in a decline in our mortgage production and a decrease in the profitability of our mortgage banking operations;

· greater than expected losses due to higher credit losses generally and specifically because losses in the sectors of our loan portfolio secured by real estate are greater than expected due to economic factors, including, but not limited to, declining real estate values, increasing interest rates, increasing unemployment, or changes in payment behavior or other factors;

· greater than expected losses due to higher credit losses because our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral;

· changes in the amount of our loan portfolio collateralized by real estate and weaknesses in the South Carolina, eastern North Carolina and national real estate markets;

· the rate of delinquencies and amount of loans charged-off;

· the adequacy of the level of our allowance for loan losses and the amount of loan loss provisions required in future periods;

· the rate of loan growth in recent or future years;

· our ability to attract and retain key personnel;

· our ability to retain our existing customers, including our deposit relationships;

· significant increases in competitive pressure in the banking and financial services industries;

· adverse changes in asset quality and resulting credit risk-related losses and expenses;

· changes in the interest rate environment which could reduce anticipated or actual margins;

· changes in political conditions or the legislative or regulatory environment, including, but not limited to, the Dodd-Frank Act and regulations adopted thereunder, changes in federal or state tax laws or interpretations thereof by taxing authorities and other governmental initiatives affecting the banking, mortgage banking, and financial service industries;

· changes occurring in business conditions and inflation;

· increased funding costs due to market illiquidity, increased competition for funding, or increased regulatory requirements with regard to funding;

· our business continuity plans or data security systems could prove to be inadequate, resulting in a material interruption in, or disruption to, business and a negative impact on results of operations;

49

· changes in deposit flows;

· changes in technology;

· changes in monetary and tax policies;

· changes in accounting policies, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board and the FASB;

· loss of consumer confidence and economic disruptions resulting from terrorist activities or other military actions;

· our expectations regarding our operating revenues, expenses, effective tax rates and other results of operations;

· our anticipated capital expenditures and our estimates regarding our capital requirements;

· our liquidity and working capital requirements;

· competitive pressures among depository and other financial institutions;

· the growth rates of the markets in which we compete;

· our anticipated strategies for growth and sources of new operating revenues;

· our current and future products, services, applications and functionality and plans to promote them;

· anticipated trends and challenges in our business and in the markets in which we operate;

· the evolution of technology affecting our products, services and markets;

· our ability to retain and hire necessary employees and to staff our operations appropriately;

· management compensation and the methodology for its determination;

· our ability to compete in our industry and innovation by our competitors;

· increased cybersecurity risk, including potential business disruptions or financial losses;

· acquisition integration risks, including potential deposit attrition, higher than expected costs, customer loss and business disruption, including, without limitation, potential difficulties in maintaining relationships with key personnel and other integration related matters, and the inability to identify and successfully negotiate and complete additional combinations with potential merger or acquisition partners or to successfully integrate such businesses into the Company, including the ability to realize the benefits and cost savings from, and limit any unexpected liabilities associated with, any such business combinations;

· our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business; and

· estimates and estimate methodologies used in preparing our consolidated financial statements and determining option exercise prices and stock-based compensation.

If any of these risks or uncertainties materialize, or if any of the assumptions underlying such forward-looking statements prove to be incorrect, our results could differ materially from those expressed in, implied or projected by, such forward-looking statements. For information with respect to factors that could cause actual results to differ from the expectations stated in the forward-looking statements, see “Risk Factors” under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017. We urge investors to consider all of these factors carefully in evaluating the forward-looking statements contained in this Quarterly Report on Form 10-Q and our other reports filed pursuant to the Securities Exchange Act of 1934. We make these forward-looking statements as of the date of this document and we do not intend, and assume no obligation, to update the forward-looking statements or to update the reasons why actual results could differ from those expressed, implied or projected by us in the forward-looking statements.

Company Overview

Carolina Financial Corporation is a Delaware corporation that was organized in February 1997 to serve as a bank holding company. In 2017, it applied for, and received, financial holding company status from the Federal Reserve. The Company operates principally through its wholly-owned subsidiary, CresCom Bank, a South Carolina state-chartered bank. CresCom Bank operates Crescent Mortgage Company, Carolina Service Corporation of Charleston, CresCom Insurance, LLC, CresCom Leasing, LLC, and DTFS Inc., as wholly-owned subsidiaries of CresCom Bank. Except where the context otherwise requires, the “Company”, “we”, “us” and “our” refer to Carolina Financial Corporation and its consolidated subsidiaries and the “Bank” refers to CresCom Bank.

CresCom Bank provides a full range of commercial and retail banking financial services designed to meet the financial needs of our customers through its branch network in South Carolina and North Carolina. Crescent Mortgage Company, headquartered in Atlanta, Georgia, is a wholesale mortgage company approved to originate loans in 48 states partnering with community banks, credit unions and mortgage brokers. 

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Like most community banks, we derive a significant portion of our income from interest we receive on our loans and investments. Our primary source of funds for making these loans and investments is our deposits, both interest-bearing and noninterest-bearing. Consequently, one of the key measures of our success is our amount of net interest income, or the difference between the income on our interest-earning assets, such as loans and investments, and the expense on our interest-bearing liabilities, such as deposits and borrowed funds. In order to maximize our net interest income, we must not only manage the volume of these balance sheet items, but also the yields that we earn on our interest-earning assets and the rates that we pay on interest-bearing liabilities. 

There are risks inherent in all loans, so we maintain an allowance for loan losses to absorb probable losses on existing loans that may become uncollectible. We establish and maintain this allowance by charging a provision for loan losses against our operating earnings.

In addition to earning interest on our loans and investments, we derive a portion of our income from Crescent Mortgage Company through mortgage banking income as well as servicing income. We also earn income through fees that we charge to our customers. Likewise, we incur other operating expenses as well.

Economic conditions, competition, and the monetary and fiscal policies of the federal government significantly affect most financial institutions, including the Bank. Lending and deposit activities and fee income generation are influenced by levels of business spending and investment, consumer income, consumer spending and savings, capital market activities, and competition among financial institutions as well as client preferences, interest rate conditions and prevailing market rates on competing products in our market areas.

Executive Summary of Operating Results

The following is a summary of the Company’s financial highlights and significant events in second quarter of 2018:

· Net income for the second quarter 2018 increased 60.2% to $15.0 million, or $0.70 per diluted share, from $9.3 million, or $0.58 per diluted share for the second quarter of 2017. Included in net income are pretax merger-related expenses of $0.5 million and $0.3 million for the second quarter of 2018 and 2017, respectively.

· Operating earnings for the second quarter of 2018, which exclude certain non-operating income and expenses, increased 70.9% to $15.6 million, or $0.73 or per diluted share, from $9.1 million, or $0.56 per diluted share, for the second quarter of 2017.

· Operating earnings for the second quarter of 2018 have been adjusted to eliminate the following significant items:

o Pretax merger-related expenses of $506,000.

o The fair value gain on interest rate swaps of $451,000.

o The loss on sale of securities of $746,000.

· Performance ratios for the second quarter of 2018 compared to the second quarter of 2017:

o Return on average assets was 1.65% compared to 1.72%.

o Operating return on average assets was 1.72% compared to 1.69%.

o Return on average tangible equity was 17.02% compared to 16.02%.

o Operating return on average tangible equity was 17.74% compared to 15.65%.

· Loans receivable, gross grew $107.7 million, or at an annualized rate of 9.3% since December 31, 2017.

· Nonperforming assets to total assets were 0.28% at June 30, 2018 compared to 0.20% at December 31, 2017.

· Total deposits increased $103.9 million since December 31, 2017. Core deposits increased $76.6 million since December 31, 2017.

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Non-GAAP Financial Measures

Statements included in this management’s discussion and analysis include non-GAAP financial measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP financial measures to GAAP financial measures. The Company’s management uses these non-GAAP financial measures, including: (i) operating earnings; (ii) operating earnings per common share (iii) operating return on average assets, (iv) operating return on average tangible equity, (v) core deposits, (vi) tangible book value and (vii) allowance for loan losses to non-acquired loans.

Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Company without regard to transactional activities. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider the Company’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the Company’s results or financial condition as reported under GAAP.

The following is a summary of the Company’s performance measures: 

	At or for the Three						At or for the Six
	Months Ended						Months Ended
	June 30,			June 30,			June 30,			June 30,
	2018			2017			2018			2017
Performance Ratios (annualized):
Return on average equity		12.03	%		13.45	%		7.80	%		11.68	%
Return on average assets		1.65	%		1.72	%		1.06	%		1.45	%
Return on average tangible equity (Non-GAAP)		17.02	%		16.02	%		11.15	%		13.25	%
Average earning assets to average total assets		89.70	%		90.68	%		89.50	%		91.23	%
Average loans receivable to average deposits		89.68	%		86.51	%		89.22	%		88.65	%
Average stockholders’ equity to average assets		13.72	%		12.82	%		13.64	%		12.40	%
Net interest margin-tax equivalent (1)		4.11	%		4.03	%		4.15	%		3.96	%
Net charge-offs (recovery) to average loans receivable		0.05	%		(0.01	)%		(0.08	)%		(0.01	)%
Nonperforming assets to period end loans receivable		0.42	%		0.48	%		0.42	%		0.48	%
Nonperforming assets to total assets		0.28	%		0.31	%		0.28	%		0.31	%
Nonperforming loans to total loans		0.35	%		0.38	%		0.35	%		0.38	%
Allowance for loan losses as a percentage of loans receivable (end of period)		0.54	%		0.75	%		0.54	%		0.75	%
Allowance for loan losses as a percentage of non-acquired loans receivable (Non-GAAP)		0.80	%		0.93	%		0.80	%		0.93	%
Allowance for loan losses as a percentage of nonperforming loans		153.84	%		196.92	%		153.84	%		196.92	%

(1) Net interest margin-tax equivalent reflects tax-exempt income on a tax-equivalent basis.

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The following table presents a reconciliation of Non-GAAP performance measures for consolidated operating earnings and corresponding ratios:

Carolina Financial Corporation
Reconciliation of Non-GAAP Financial Measures - Consolidated
(Unaudited)
(In thousands, except share data)
	For the Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
As Reported:
Income before income taxes	$	19,002			4,581			10,630			11,968			12,013
Tax expense		4,036			525			4,302			3,975			2,673
Net Income	$	14,966			4,056			6,328			7,993			9,340
Average equity	$	497,694			477,830			380,529			286,524			277,708
Average tangible equity (Non-GAAP)	$	351,703			331,047			288,156			241,489			233,256
Average assets	$	3,627,402			3,522,407			3,048,214			2,230,586			2,166,803
Return on average assets		1.65	%		0.46	%		0.83	%		1.43	%		1.72	%
Return on average equity		12.03	%		3.40	%		6.65	%		11.16	%		13.45	%
Return on average tangible equity (Non-GAAP)		17.02	%		4.90	%		8.78	%		13.24	%		16.02	%
Tangible equity to tangible assets		11.45	%		9.65	%		9.73	%		11.09	%		11.03	%
Weighted average common shares outstanding:
Basic		21,243,094			20,908,225			19,207,307			16,029,332			16,029,332
Diluted		21,454,039			21,119,316			19,443,353			16,187,869			16,180,171
Earnings per common share:
Basic	$	0.70			0.19			0.33			0.50			0.58
Diluted	$	0.70			0.19			0.33			0.49			0.58
Operating Earnings and Performance Ratios:
Income before income taxes	$	19,002			4,581			10,630			11,968			12,013
(Gain)/loss on sale of securities		746			697			242			(368	)		(621	)
Fair value adjustments on interest rate swaps		(451	)		(803	)		(419	)		(90	)		69
Merger related expenses		506			14,710			6,391			311			279
Operating earnings before income taxes		19,803			19,185			16,844			11,821			11,740
Tax expense (1)		4,205			4,242			5,721			3,926			2,612
Operating earnings (Non-GAAP)	$	15,598			14,943			11,123			7,895			9,128
Average equity	$	497,694			477,830			380,529			286,524			277,708
Less average intangible assets		(145,991	)		(146,783	)		(92,373	)		(45,035	)		(44,452	)
Average tangible common equity (Non-GAAP)	$	351,703			331,047			288,156			241,489			233,256
Average assets	$	3,627,402			3,522,407			3,048,214			2,230,586			2,166,803
Less average intangible assets		(145,991	)		(146,783	)		(92,373	)		(45,035	)		(44,452	)
Average tangible assets (Non-GAAP)	$	3,481,411			3,375,624			2,955,841			2,185,551			2,122,351
Operating return on average assets (Non-GAAP)		1.72	%		1.70	%		1.46	%		1.42	%		1.69	%
Operating return on average equity (Non-GAAP)		12.54	%		12.51	%		11.69	%		11.02	%		13.15	%
Operating return on average tangible assets (Non-GAAP)		1.79	%		1.77	%		1.51	%		1.44	%		1.72	%
Operating return on average tangible equity (Non-GAAP)		17.74	%		18.06	%		15.44	%		13.08	%		15.65	%
Weighted average common shares outstanding:
Basic		21,243,094			20,908,225			19,207,307			16,029,332			16,029,332
Diluted		21,454,039			21,119,316			19,443,353			16,187,869			16,180,171
Operating earnings per common share:
Basic (Non-GAAP)	$	0.73			0.71			0.58			0.49			0.57
Diluted (Non-GAAP)	$	0.73			0.71			0.57			0.49			0.56

(1) Tax expense is determined using the effective tax rate adjusted to eliminate the impact of the non-operating items.

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	At the Month Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Core deposits:
Noninterest-bearing demand accounts	$	577,568			547,744			525,615			333,267			330,641
Interest-bearing demand accounts		584,719			558,942			551,308			309,241			298,123
Savings accounts		198,571			212,249			213,142			69,552			70,336
Money market accounts		458,558			463,676			452,734			377,754			380,108
Total core deposits (Non-GAAP)		1,819,416			1,782,611			1,742,799			1,089,814			1,079,208
Certificates of deposit:
Less than $250,000		788,693			791,789			755,887			567,483			539,177
$250,000 or more		100,689			102,569			106,243			50,357			45,344
Total certificates of deposit		889,382			894,358			862,130			617,840			584,521
Total deposits	$	2,708,798			2,676,969			2,604,929			1,707,654			1,663,729
	At the Month Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Tangible book value per share:
Total stockholders’ equity	$	551,784			475,046			475,381			290,224			281,818
Less intangible assets		(145,595	)		(146,387	)		(147,193	)		(44,953	)		(45,123	)
Tangible common equity (Non-GAAP)	$	406,189			328,659			328,188			245,271			236,695
Issued and outstanding shares		22,570,182			21,057,539			21,022,202			16,159,309			16,156,943
Less nonvested restricted stock awards		(137,345	)		(136,395	)		(134,302	)		(99,639	)		(101,489	)
Period end dilutive shares		22,432,837			20,921,144			20,887,900			16,059,670			16,055,454
Total stockholders’ equity	$	551,784			475,046			475,381			290,224			281,818
Divided by period end dilutive shares		22,432,837			20,921,144			20,887,900			16,059,670			16,055,454
Common book value per share	$	24.60			22.71			22.76			18.07			17.55
Tangible common equity (Non-GAAP)	$	406,189			328,659			328,188			245,271			236,695
Divided by period end dilutive shares		22,432,837			20,921,144			20,887,900			16,059,670			16,055,454
Tangible common book value per share (Non-GAAP)	$	18.11			15.71			15.71			15.27			14.74
	At the Month Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Acquired and non-acquired loans:
Acquired loans receivable	$	813,688			877,012			962,300			257,461			278,275
Non-acquired gross loans receivable		1,613,533			1,503,006			1,357,228			1,227,000			1,157,145
Total gross loans receivable	$	2,427,221			2,380,018			2,319,528			1,484,461			1,435,420
% Acquired		33.52	%		36.85	%		41.49	%		17.34	%		19.39	%
Non-acquired loans	$	1,613,533			1,503,006			1,357,228			1,227,000			1,157,145
Allowance for loan losses		12,987			12,708			11,478			10,662			10,750
Allowance for loan losses to non-acquired loans (Non-GAAP)		0.80	%		0.85	%		0.85	%		0.87	%		0.93	%
Total gross loans receivable	$	2,427,221			2,380,018			2,319,528			1,484,461			1,435,420
Allowance for loan losses		12,987			12,708			11,478			10,662			10,750
Allowance for loan losses to total gross loans receivable		0.54	%		0.53	%		0.49	%		0.72	%		0.75	%

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Critical Accounting Policies 

There have been no significant changes to our critical accounting policies from those disclosed in our 2017 Annual Report on Form 10-K, except as reflected below. Refer to the notes to our consolidated financial statements in our 2017 Annual Report on Form 10-K for a full disclosure of all critical accounting policies.

Results of Operations

Summary

The Company reported an increase in net income for the three months ended June 30, 2018 to $0.70 per diluted share, as compared to $0.58 per diluted share, for the three months ended June 30, 2017. Included in net income for the three months ended June 30, 2018 and 2017 were pretax merger-related expenses of $0.5 million and $0.3 million, respectively. The Company reported increased net income for the six months ended June 30, 2018 of $19.0 million, or $0.90 per diluted share, as compared to $14.2 million, or $0.94 per diluted share, for the six months ended June 30, 2017. Included in net income for the six months ended June 30, 2018 and 2017 were pretax merger-related expenses of $15.2 million and $1.6 million, respectively.

Net Interest Income and Margin

Net interest income is a significant component of our net income. Net interest income is the difference between income earned on interest-earning assets and interest paid on interest-bearing liabilities. Net interest income is determined by the yields earned on interest-earning assets, rates paid on interest-bearing liabilities, the relative balances of interest-earning assets and interest-bearing liabilities, the degree of mismatch, and the maturity and repricing characteristics of interest-earning assets and interest-bearing liabilities.

Net interest income increased to $32.9 million for the three months ended June 30, 2018 from $19.1 million for the three months ended June 30, 2017. Net interest income increased to $65.0 million for the six months ended June 30, 2018 from $34.4 million for the six months ended June 30, 2017. The increase in net interest income is a result of the increase in average interest-earning assets balances, as well as an increase in the net interest margin on a tax equivalent yield basis of 8 basis points over the comparable prior year quarter. The increase in average earnings assets for the three and six month periods ended June 30, 2018 over the comparable prior year periods is primarily the result of increased balances of loans receivable and securities available for sale. Net interest margin on a tax equivalent yield basis was 19 basis points higher than the comparable prior year six month period.

The growth in loan balances was primarily the result of strong organic growth in both commercial and residential lending as well as two acquisitions. On March 18, 2017, the Company acquired approximately $194.7 million of loans, net of purchase accounting adjustments, as part of the acquisition of Greer. In addition, on November 1, 2017, the Company acquired approximately $759.2 million of loans, net of purchase accounting adjustments, as part of the acquisition of First South.

The following table sets forth information related to our average balance sheet, average yields on assets, and average costs of liabilities for the periods indicated (dollars in thousands). We derived these yields or costs by dividing income or expense by the average balance of the corresponding assets or liabilities. We derived average balances from the daily balances throughout the periods indicated. During the same periods, we had no securities purchased with agreements to resell. All investments were owned at an original maturity of over one year. Nonaccrual loans are included in earning assets in the following tables. Loan yields reflect the negative impact on our earnings of loans on nonaccrual status. The net capitalized loan costs and fees, which are considered immaterial, are amortized into interest income on loans.

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	For The Three Months Ended June 30,
	2018								2017
				Interest		Average						Interest		Average
	Average			Earned/		Yield/			Average			Earned/		Yield/
	Balance			Paid		Rate			Balance			Paid		Rate
Interest-earning assets:
Loans held for sale	$	23,137			256		4.44	%		22,412			221		3.96	%
Loans receivable, net (1)		2,401,075			32,497		5.43	%		1,412,940			18,059		5.13	%
Interest-bearing cash		16,413			73		1.79	%		13,145			34		1.04	%
Securities available for sale		789,490			6,359		3.22	%		499,730			3,661		2.90	%
Dividends from non-equitable securities		20,135			263		5.24	%		10,976			115		4.20	%
Other investments		3,458			29		3.36	%		5,691			33		2.33	%
Total interest-earning assets		3,253,708			39,477		4.87	%		1,964,894			22,123		4.52	%
Non-earning assets		373,694								201,909
Total assets	$	3,627,402								2,166,803
Interest-bearing liabilities:
Demand accounts		567,079			503		0.36	%		286,330			197		0.28	%
Money market accounts		463,163			743		0.64	%		378,163			415		0.44	%
Savings accounts		205,586			150		0.29	%		69,825			35		0.20	%
Certificates of deposit		887,078			2,852		1.29	%		572,443			1,451		1.02	%
Short-term borrowed funds		362,874			1,705		1.88	%		170,333			429		1.01	%
Long-term debt		66,863			619		3.71	%		64,234			498		3.11	%
Total interest-bearing liabilities		2,552,643			6,572		1.03	%		1,541,328			3,025		0.79	%
Noninterest-bearing deposits		554,495								326,524
Other liabilities		22,569								21,243
Stockholders’ equity		497,694								277,708
Total liabilities and Stockholders’ equity	$	3,627,402								2,166,803
Net interest spread							3.84	%							3.73	%
Net interest margin		4.06	%							3.90	%
Net interest margin (tax-equivalent) (2)		4.11	%							4.03	%
Net interest income				$	32,905								19,098

(1) Average balances of loans receivable, net include nonaccrual loans.  

(2) The tax-equivalent net interest margin reflects tax-exempt income on a tax-equivalent basis.

Our net interest margin was 4.06%, or 4.11% on a tax-equivalent basis, for the three months ended June 30, 2018 compared to 3.90%, or 4.03% on a tax equivalent basis, for the three months ended June 30, 2017. The increase in margin from period to period is the result of an increase in yield on securities available for sale and loans receivable net of the increase in cost of funds. The yield on loans receivable during the quarter ended June 30, 2018 and 2017 reflects accretion income from loans purchased in acquisitions of $1.9 million and $1.1 million respectively.

Our net interest spread, which is not on a tax-equivalent basis, was 3.84% for the three months ended June 30, 2018 as compared to 3.73% for the same period in 2017. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The 11 basis point increase in net interest spread is a result of the 35 basis point increase in yield on interest-earning assets net of a 24 basis point increase in rates paid on interest-bearing liabilities. The increase in the rate realized on loans is primarily the result of variable rate loans repricing as a result of the increases in the prime rate.

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	For The Six Months Ended June 30,
	2018								2017
				Interest		Average						Interest		Average
	Average			Earned/		Yield/			Average			Earned/		Yield/
	Balance			Paid		Rate			Balance			Paid		Rate
Interest-earning assets:
Loans held for sale	$	22,395			460		4.14	%		20,120			389		3.90	%
Loans receivable, net (1)		2,361,933			63,956		5.46	%		1,313,859			32,858		5.04	%
Interest-bearing cash		21,676			178		1.66	%		14,424			66		0.92	%
Securities available for sale		770,620			12,066		3.13	%		431,618			6,214		2.86	%
Dividends from non-equitable securities		19,382			438		4.56	%		10,511			216		4.14	%
Other investments		3,442			56		3.28	%		4,468			49		2.18	%
Total interest-earning assets		3,199,448			77,154		4.86	%		1,795,000			39,792		4.48	%
Non-earning assets		375,469								172,563
Total assets	$	3,574,917								1,967,563
Interest-bearing liabilities:
Demand accounts		546,616			845		0.31	%		232,285			311		0.27	%
Money market accounts		463,831			1,374		0.60	%		341,719			702		0.41	%
Savings accounts		209,306			260		0.25	%		61,012			56		0.19	%
Certificates of deposit		880,900			5,412		1.24	%		541,764			2,721		1.01	%
Short-term borrowed funds		346,773			2,958		1.72	%		175,238			784		0.90	%
Long-term debt		69,350			1,269		3.69	%		45,577			850		3.77	%
Total interest-bearing liabilities		2,516,776			12,118		0.97	%		1,397,595			5,424		0.78	%
Noninterest-bearing deposits		546,523								305,265
Other liabilities		24,097								20,813
Stockholders’ equity		487,521								243,890
Total liabilities and Stockholders’ equity	$	3,574,917								1,967,563
Net interest spread							3.89	%							3.70	%
Net interest margin		4.10	%							3.86	%
Net interest margin (tax-equivalent) (2)		4.15	%							3.96	%
Net interest income					65,036								34,368

(1) Average balances of loans receivable, net include nonaccrual loans.

(2) The tax-equivalent net interest margin reflects tax-exempt income on a tax-equivalent basis.

Our net interest margin was 4.10%, or 4.15% on a tax-equivalent basis, for the six months ended June 30, 2018 compared to 3.86%, or 3.96% on a tax equivalent basis, for the six months ended June 30, 2017. The increase in margin from period to period is the result of a shift to higher yielding earning assets as well as an increase in yield on securities available for sale and loans receivable, net of the increase in cost of funds. Average loans receivable comprised 73.8% of earnings assets for the six months ended June 30, 2018 compared to 73.2% for the six months ended June 30, 2017. The yield on loans receivable during the six months ended June 30, 2018 and 2017 reflects accretion income from loans purchased in acquisitions of $4.8 million and $1.4 million, respectively.

Our net interest spread, which is not on a tax-equivalent basis, was 3.89% for the six months ended June 30, 2018 as compared to 3.70% for the same period in 2017. The net interest spread is the difference between the yield we earn on our interest-earning assets and the rate we pay on our interest-bearing liabilities. The basis point increase in net interest spread is a result of the 38 basis point increase in yield on interest-earning assets as well as a 19 basis point increase in rates paid on interest-bearing liabilities. The increase in the rate realized on loans is primarily the result of variable rate loans repricing as a result of the increases in the prime rate.

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Provision for Loan Losses

We have established an allowance for loan losses through a provision for loan losses charged as an expense on our consolidated statements of operations. We review our loan portfolio periodically to evaluate our outstanding loans and to measure both the performance of the portfolio and the adequacy of the allowance for loan losses. Please see the discussion below under “Allowance for Loan Losses” for a description of the factors we consider in determining the amount of the provision we expense each period to maintain this allowance.

Following is a summary of the activity in the allowance for loan losses during the periods ended June 30, 2018 and 2017.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(Dollars in thousands)
Balance, beginning of period	$	12,708			10,715			11,478			10,688
Provision for loan losses		559			—			559			—
Loan charge-offs		(355	)		(20	)		(488	)		(45	)
Loan recoveries		74			55			1,437			107
Balance, end of period	$	12,987			10,750			12,987			10,750

The Company experienced net chargeoffs of $281,000 for the three months ended June 30, 2018 and net recoveries of $35,000 for the three months ended June 30, 2017. The Company experienced net recoveries of $949,000 for the six months ended June 30, 2018 and net recoveries of $62,000 for the six months ended June 30, 2017. Asset quality has remained relatively consistent since December 31, 2017, with nonperforming assets of 0.28% as of June 30, 2018 and 0.20% as of December 31, 2017. Provision for loan losses of $559,000 was recorded in the second quarter of 2018 primarily driven by organic loan growth. No provision expense for loan losses was recorded during the first six months of 2017 primarily due to the net recoveries experienced and asset quality.

Provision expense is recorded based on our assessment of general loan loss risk as well as asset quality. The allowance for loan losses is management’s estimate of probable credit losses inherent in the loan portfolio at the balance sheet date. Management determines the allowance based on an ongoing evaluation. Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on non-impaired loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. For further discussion regarding the calculation of the allowance, see the “Allowance for Loan Losses” discussion below.

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Noninterest Income and Expense 

Noninterest income provides us with additional revenues that are significant sources of income. The major components of noninterest income for the three and six months ended June 30, 2018 and 2017 are presented below:

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Noninterest income:
Mortgage banking income	$	4,215			4,289			8,017			7,897
Deposit service charges		1,988			998			4,012			1,856
Net gain (loss) on sale of securities		(746	)		621			(1,443	)		806
Fair value adjustments on interest rate swaps		451			(69	)		1,255			(127	)
Net increase in cash value life insurance		385			281			775			492
Mortgage loan servicing income		2,090			1,604			4,114			3,170
Other		2,644			1,081			4,346			1,941
Total noninterest income	$	11,027			8,805			21,076			16,035

Noninterest income increased to $11.0 million for the three months ended June 30, 2018 from $8.8 million for the three months ended June 30, 2017. Noninterest income increased to $ 21.1 million for the six months ended June 30, 2018 from $16.0 million for the six months ended June 30, 2017. The increase in noninterest income for the three and six months ended June 30, 2018 over the comparable periods in 2017 primarily relates to an increase in mortgage loan servicing income, deposit service charges, fair value adjustments on interest rate swaps and increases in other noninterest income.

The following table provides a break out of mortgage banking:

	For the Three Months Ended June 30,
	Loan Originations				Mortgage Banking Income				Margin
	2018		2017		2018		2017		2018			2017
Additional segment information:
Community banking	$	32,796		24,416		648		582		1.98	%		2.38	%
Wholesale mortgage banking		205,569		213,853		3,567		3,707		1.74	%		1.73	%
Total	$	238,365		238,269		4,215		4,289		1.77	%		1.80	%
	For the Six Months Ended June 30,
	Loan Originations				Mortgage Banking Income				Margin
	2018		2017		2018		2017		2018			2017
Additional segment information:
Community banking	$	64,223		39,169		1,302		941		2.03	%		2.40	%
Wholesale mortgage banking		386,063		394,683		6,715		6,956		1.74	%		1.76	%
Total	$	450,286		433,852		8,017		7,897		1.78	%		1.82	%

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Mortgage loan servicing income increased $486,000 for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. Mortgage loan servicing income increased $944,000 for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. The increase in mortgage loan servicing income was primarily driven by an increase in loans serviced for the comparative periods.

The fair value adjustment on interest rate swaps increased noninterest income by $520,000 for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. The fair value adjustment on interest rate swaps increased noninterest income by $1.4 million for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. The change in fair value adjustment on interest rate swaps relates to the change in interest rates from period to period. The Company uses standalone interest rate swaps to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities including duration mismatches.

The following table sets forth for the periods indicated the primary components of noninterest expense:

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Noninterest expense:
Salaries and employee benefits	$	13,541			9,255			27,210			17,864
Occupancy and equipment		4,094			2,439			7,747			4,621
Marketing and public relations		322			416			698			797
FDIC insurance		265			75			520			175
Recovery of mortgage loan repurchase losses		(150	)		(225	)		(300	)		(450	)
Legal expense		157			151			233			216
Other real estate expense, net		105			26			11			45
Mortgage subservicing expense		568			505			1,132			991
Amortization of mortgage servicing rights		889			665			1,868			1,335
Merger related expenses		506			279			15,216			1,599
Other		4,074			2,304			7,635			4,283
Total noninterest expense	$	24,371			15,890			61,970			31,476

Noninterest expense represents the largest expense category for the Company. Noninterest expense increased to $24.4 million for the three months ended June 30, 2018 from $15.9 million for the three months ended June 30, 2017. Noninterest expense increased to $62.0 million for the six months ended June 30, 2018 from $31.5 million for the six months ended June 30, 2017. The increase in noninterest expense is primarily the result of an increase in salaries and employee benefits and occupancy and equipment as well as merger related expenses related to the acquisition of First South Bank. Merger related expenses totaled $15.2 million for the six months ended June 30, 2018 as compared to $1.6 million for the six months ended June 30, 2017.

Income Tax Expense

Our effective tax rate was 21.2% for three month period ended June 30, 2018, compared to 22.2% for the three month period ended June 30, 2017. Our effective tax rate was 19.3% for six month period ended June 30, 2018, compared to 24.7% for the six month period ended June 30, 2017. The decrease in the effective tax rate from period to period reflects a reduction in the federal income tax rate from 35% to 21% as enacted in the 2017 Tax Cuts Jobs Act on December 22, 2017. In addition to the lower federal tax rate, the decrease in the effective tax rate from period to period reflects an increase in interest income on municipal securities during 2018 and tax benefits related to excess stock-based compensation.

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Balance Sheet Review

Securities

Our primary objective in managing the investment portfolio is to maintain a portfolio of high quality, highly liquid investments yielding competitive returns. We are required under federal regulations to maintain adequate liquidity to ensure safe and sound operations. We maintain investment balances based on a continuing assessment of cash flows, the level of current and expected loan production, current interest rate risk strategies and the assessment of the potential future direction of market interest rate changes. Investment securities differ in terms of default, interest rate, liquidity and expected rate of return risk.

At June 30, 2018, our securities portfolio, excluding FHLB stock and other investments, was $805.0 million or approximately 21.8% of our assets. Our available-for-sale securities portfolio included US agency securities, municipal securities, collateralized loan obligations, mortgage-backed securities (agency and non-agency), and trust preferred securities with a fair value of $805.0 million and an amortized cost of $807.7 million resulting in a net unrealized loss of $2.7 million.

As securities are purchased, they are designated as held-to-maturity or available-for-sale based upon our intent, which incorporates liquidity needs, interest rate expectations, asset/liability management strategies, and capital requirements. We do not currently hold, nor have we ever held, any securities that are designated as trading securities.

The increase in securities from period to period is attributable to an increase in mortgage-backed securities and collateralized loan obligations partially offset by a decrease in municipal securities in line with the Company’s asset and liability management objectives.

Loans by Type

Since loans typically provide higher interest yields than other types of interest-earning assets, a substantial percentage of our earning assets are invested in our loan portfolio. Gross loans receivable at June 30, 2018 and December 2017 were $2.4 billion and $2.3 billion, respectively.

Our loan portfolio consists primarily of loans secured by real estate mortgages. As of June 30, 2018, our loan portfolio included $2.0 billion, or 84.7%, of gross loans secured by real estate. As of December 31, 2017, our loan portfolio included $2.0 billion, or 85.6%, of gross loans secured by real estate. Substantially all of our real estate loans are secured by residential or commercial property. We obtain a security interest in real estate, in addition to any other available collateral. This collateral is taken to increase the likelihood of the ultimate repayment of the loan. Generally, we limit the loan-to-value ratio on loans to coincide with the appropriate regulatory guidelines. We attempt to maintain a relatively diversified loan portfolio to help reduce the risk inherent in concentration in certain types of collateral and business types.

As shown in the table below, gross loans receivable increased $107.7 million since December 31, 2017. The growth in loan balances was primarily the result of strong organic growth in both commercial and residential lending.

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The following table summarizes loans by type and percent of total at the end of the periods indicated:

	At June 30,					At December 31,
	2018					2017
			% of Total					% of Total
All Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)					(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	699,435		28.82	%	$	665,774		28.70	%
Home equity		87,946		3.62	%		90,141		3.89	%
Commercial real estate		940,558		38.75	%		933,820		40.26	%
Construction and development		327,778		13.50	%		294,793		12.71	%
Consumer loans		16,041		0.66	%		19,990		0.86	%
Commercial business loans		355,463		14.65	%		315,010		13.58	%
Total gross loans receivable		2,427,221		100.00	%		2,319,528		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,414,234				$	2,308,050

Maturities and Sensitivity of Loans to Changes in Interest Rates

The information in the following table is based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below because borrowers have the right to prepay obligations with or without prepayment penalties.

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The following table summarizes the loan maturity distribution by type and related interest rate characteristics.

	At June 30, 2018
			After one
	One Year		but within		After five
	or Less		five years		years		Total
			(In thousands)
Loans secured by real estate:
One-to-four family	$	18,594		130,942		549,899		699,435
Home equity		8,771		22,738		56,437		87,946
Commercial real estate		87,372		575,912		277,274		940,558
Construction and development		114,586		177,923		35,269		327,778
Consumer loans		1,534		11,878		2,629		16,041
Commercial business loans		71,492		167,229		116,742		355,463
Total gross loans receivable	$	302,349		1,086,622		1,038,250		2,427,221
Loans maturing - after one year
Variable rate loans							$	710,215
Fixed rate loans								1,414,657
							$	2,124,872

Nonperforming and Problem Assets

Nonperforming assets include loans on which interest is not being accrued, accruing loans that are 90 days or more delinquent and foreclosed property. Foreclosed property consists of real estate and other assets acquired as a result of a borrower’s loan default. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction of principal when received. In general, a nonaccrual loan may be placed back onto accruing status once the borrower has made a minimum of nine consecutive payments in accordance with the loan terms. Further, the borrower must show capacity to continue performing into the future prior to restoration of accrual status. As of June 30, 2018, the Company had $1.3 million of PCI loans that were 90 days past due and accruing. At December 31, 2017, the Company had $1.9 million of PCI loans that were 90 days past due and still accruing.

Troubled Debt Restructurings (“TDRs”)

The Company designates loan modifications as TDRs when, for economic or legal reasons related to the borrower’s financial difficulties, it grants a concession to the borrower that it would not otherwise consider. Loans on nonaccrual status at the date of modification are initially classified as nonaccrual TDRs. Loans on accruing status at the date of modification are initially classified as accruing TDRs at the date of modification, if the note is reasonably assured of repayment and performance is in accordance with its modified terms. Such loans may be designated as nonaccrual loans subsequent to the modification date if reasonable doubt exists as to the collection of interest or principal under the restructuring agreement. Nonaccrual TDRs are returned to accrual status when there is economic substance to the restructuring, there is well 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 repayment performance in accordance with the modified terms for a reasonable period of time, generally a minimum of six months.

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The following table summarizes nonperforming and problem assets, excluding purchased credit impaired loans, at the end of the periods indicated.

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Loans receivable:
90 days and still accruing	$	19		—
Nonaccrual loans-renegotiated loans		1,295		1,140
Nonaccrual loans-other		7,128		2,793
Real estate acquired through foreclosure, net		1,726		3,106
Total Non-Performing Assets	$	10,168		7,039
Problem Assets not included in Non-Performing Assets-Accruing renegotiated loans outstanding	$	4,994		5,324

At June 30, 2018, nonperforming assets were $10.2 million, or 0.28% of total assets. Comparatively, nonperforming assets were $7.0 million, or 0.20% of total assets, at December 31, 2017. Nonperforming loans were 0.35% and 0.17% of gross loans receivable at June 30, 2018 and December 31, 2017, respectively.

Potential problem loans, which are not included in nonperforming loans, amounted to approximately $5.0 million at June 30, 2018, compared to $5.3 million at December 31, 2017. Potential problem loans represent those loans with a well-defined weakness and where information about possible credit problems of borrowers has caused management to have serious doubts about the borrower’s ability to comply with present repayment terms.

Substantially all of the nonaccrual loans, accruing loans 90 days or more delinquent and accruing renegotiated loans at June 30, 2018 and December 31, 2017 are collateralized by real estate. The Bank utilizes third party appraisers to determine the fair value of collateral dependent loans. Our current loan and appraisal policies require the Bank to obtain updated appraisals on loans greater than $100,000 on an annual basis, either through a new external appraisal or an internal appraisal evaluation. Impaired loans are individually reviewed on a quarterly basis to determine the level of impairment. We typically charge-off a portion or create a specific reserve for impaired loans when we do not expect repayment to occur as agreed upon under the original terms of the loan agreement. Management believes based on information known and available currently, the probable losses related to problem assets are adequately reserved in the allowance for loan losses.

Credit quality indicators continue to show favorable metrics. The Company can make no assurances that nonperforming assets will continue to remain low in future periods. The Company continues to monitor the loan portfolio and foreclosed assets carefully and is continually working to reduce its problem assets.

Allowance for Loan Losses

The allowance for loan losses is management’s estimate of probable credit losses inherent in the loan portfolio at the balance sheet date. Management determines the allowance based on an ongoing evaluation. Estimating the amount of the allowance for loan losses requires significant judgment and the use of estimates related to the amount and timing of expected future cash flows on impaired loans, estimated losses on non-impaired loans based on historical loss experience, and consideration of current economic trends and conditions, all of which may be susceptible to significant change. The allowance consists of specific and general components.

The general component covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by major loan category and is based on the actual loss history trends for the previous 20 quarters. The actual loss experience is supplemented with internal and external qualitative factors as considered necessary at each period and given the facts at the time. These qualitative factors adjust the 20 quarter historical loss rate to recognize the most recent loss results and changes in the economic conditions to ensure the estimated losses in the portfolio are recognized in the period incurred and that the allowance at each balance sheet date is adequate and appropriate in accordance with GAAP. Qualitative factors include consideration of the following: levels of and trends in delinquencies and impaired loans; levels of and trends in charge-offs and recoveries for the most recent twelve quarters; trends in volume and terms of loans; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and other relevant staff; national and local economic trends and conditions; industry conditions; and effects of changes in credit concentrations.

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The specific component relates to loans that are individually classified as impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. These analyses involve a high degree of judgment in estimating the amount of loss associated with specific loans, including estimating the amount and timing of future cash flows and collateral values. Impaired loans are evaluated for impairment using the discounted cash flow methodology or based on the net realizable value of the underlying collateral. Impaired loans are individually reviewed on a quarterly basis to determine the level of impairment. See additional discussion in section “Nonperforming and Problem Assets.”

While management uses the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the valuations or, if required by regulators, based upon information available to them at the time of their examinations. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels may vary from previous estimates. To the extent actual outcomes differ from management’s estimates, additional provisions for loan losses could be required that could adversely affect the Bank’s earnings or financial position in future periods.

The allowance for loan losses was $13.0 million, or 0.80% of non-acquired loans, at June 30, 2018, compared to $11.5 million, or 0.85% of total non-acquired loans, at December 31, 2017. Loans acquired in business combinations were $813.7 million and $962.3 million at June 30, 2018 and December 31, 2017, respectively. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk. At June 30, 2018 and December 31, 2017, acquired non-credit impaired loans had a purchase discount remaining of $13.9 million and $17.7 million, respectively.

The table below shows a reconciliation of acquired and non-acquired loans and allowance for loan losses to non-acquired loans:

	At the Month Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Acquired and non-acquired loans:
Acquired loans receivable	$	813,688			877,012			962,300			257,461			278,275
Non-acquired gross loans receivable		1,613,533			1,503,006			1,357,228			1,227,000			1,157,145
Total gross loans receivable	$	2,427,221			2,380,018			2,319,528			1,484,461			1,435,420
% Acquired		33.52	%		36.85	%		41.49	%		17.34	%		19.39	%
Non-acquired loans	$	1,613,533			1,503,006			1,357,228			1,227,000			1,157,145
Allowance for loan losses		12,987			12,708			11,478			10,662			10,750
Allowance for loan losses to non-acquired loans (Non-GAAP)		0.80	%		0.85	%		0.85	%		0.87	%		0.93	%
Total gross loans receivable	$	2,427,221			2,380,018			2,319,528			1,484,461			1,435,420
Allowance for loan losses		12,987			12,708			11,478			10,662			10,750
Allowance for loan losses to total gross loans receivable		0.54	%		0.53	%		0.49	%		0.72	%		0.75	%

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The Company experienced net charge-offs of $281,000 for the three months ended June 30, 2018 and net recoveries of $35,000 for the three months ended June 30, 2017. The Company experienced net recoveries of $949,000 for the six months ended June 30, 2018 and net recoveries of $62,000 for the six months ended June 30, 2017. Asset quality has remained relatively consistent since year end, with nonperforming assets to total assets of 0.28 % as of June 30, 2018 and 0.20% as of December 31, 2017.

The following table summarizes the activity related to our allowance for loan losses for the three and six months ended June 30, 2018 and 2017.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(Dollars in thousands)
Balance, beginning of period	$	12,708			10,715			11,478			10,688
Provision for loan losses		559			—			559			—
Loan charge-offs:
Loans secured by real estate:
One-to-four family		(147	)		(19	)		(147	)		(35	)
Home equity		—			—			—			—
Commercial real estate		(52	)		—			(86	)		—
Construction and development		—			—			(1	)		—
Consumer loans		(129	)		(1	)		(138	)		(10	)
Commercial business loans		(27	)		—			(116	)		—
Total loan charge-offs		(355	)		(20	)		(488	)		(45	)
Loan recoveries:
Loans secured by real estate:
One-to-four family		7			1			12			2
Home equity		—			—			8			—
Commercial real estate		42			1			47			26
Construction and development		1			1			1,037			2
Consumer loans		18			8			58			11
Commercial business loans		6			44			275			66
Total loan recoveries		74			55			1,437			107
Net loan recoveries		(281	)		35			949			62
Balance, end of period	$	12,987			10,750			12,987			10,750
Allowance for loan losses as a percentage of loans receivable (end of period)		0.54	%		0.75	%		0.54	%		0.96	%
Net charge-offs (recoveries) to average loans receivable (annualized)		0.05	%		(0.01	)%		(0.08	)%		(0.01	)%

Mortgage Operations

Mortgage Activities and Servicing

Our wholesale mortgage banking operations are conducted through our mortgage origination subsidiary, Crescent Mortgage Company. Mortgage activities involve the purchase of mortgage loans and table funded originations for the purpose of generating gains on sales of loans and fee income on the origination of loans and is included in mortgage banking income in the accompanying consolidated statements of operations. While the Company originates residential one-to-four family loans that are held in its loan portfolio, the majority of new loans are generally sold pursuant to secondary market guidelines through Crescent Mortgage Company. Generally, residential mortgage loans are sold and, depending on the pricing in the marketplace, servicing rights are either sold or retained. The level of loan sale activity and its contribution to the Company’s profitability depends on maintaining a sufficient volume of loan originations and margin. Changes in the level of interest rates and the local economy affect the volume of loans originated by the Company and the amount of loan sales and loan fees earned. Discussion related to the impact and changes within the mortgage operations is provided in “Results of Operations – Noninterest Income and Expense”. Additional segment information is provided in Note 10 “Supplemental Segment Information” in the accompanying financial statements.

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Loan Servicing

We retain the rights to service a portion of the loans we sell on the secondary market, as part of our mortgage banking activities, for which we receive service fee income. These rights are known as mortgage servicing rights, or MSRs, where the owner of the MSR acts on behalf of the mortgage loan owner and has the contractual right to receive a stream of cash flows in exchange for performing specified mortgage servicing functions. These duties typically include, but are not limited to, performing loan administration, collection, and default activities, including the collection and remittance of loan payments, responding to customer inquiries, accounting for principal and interest, holding custodial (impound) funds for the payment of property taxes and insurance premiums, counseling delinquent mortgagors, modifying loans and supervising foreclosures and property dispositions. We subservice the duties and responsibilities obligated to the owner of the MSR to a third party provider for which we pay a fee.

We recognize the rights to service mortgage loans for others as an asset. We initially record the MSR at fair value and subsequently account for the asset at lower of cost or market using the amortization method. Servicing assets are amortized in proportion to, and over the period of, the estimated net servicing income and are carried at amortized cost. A valuation is performed by an independent third party on a quarterly basis to assess the servicing assets for impairment based on the fair value at each reporting date. The fair value of servicing assets is determined by calculating the present value of the estimated net future cash flows consistent with contractually specified servicing fees. This valuation is performed on a disaggregated basis, based on loan type and year of production. Generally, loan servicing becomes more valuable when interest rates rise (as prepayments typically decrease) and less valuable when interest rates decline (as prepayments typically increase). As discussed in detail in notes to the consolidated financial statements, we use an appropriate weighted average constant prepayment rate, discount rate, and other defined assumptions to model the respective cash flows and determine the fair value of the servicing asset at each reporting date.

The Company was servicing $3.0 billion loans for others at June 30, 2018 and $2.9 billion at December 31, 2017. Mortgage servicing rights asset had a balance of $23.6 million and $21.0 million at June 30, 2018 and December 31, 2017, respectively. The economic estimated fair value of the mortgage servicing rights was $29.9 million and $26.3 million at June 30, 2018 and December 31, 2017, respectively. Amortization expense related to the mortgage servicing rights was $0.9 million and $0.7 million during the three months ended June 30, 2018 and 2017, respectively. Amortization expense related to the mortgage servicing rights was $1.9 million and $1.3 million during the six months ended June 30, 2018 and 2017, respectively.

Below is a roll-forward of activity in the balance of the servicing assets for the three months ended June 30, 2018 and 2017.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
MSR beginning balance	$	21,719			15,792			21,003			15,032
Amount capitalized		1,657			1,565			3,352			2,995
Purchased servicing		1,139			—			1,139			—
Amount amortized		(889	)		(665	)		(1,868	)		(1,335	)
MSR ending balance	$	23,626			16,692			23,626			16,692

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Reserve For Mortgage Repurchase Losses

Loans held for sale have primarily been fixed-rate single-family residential mortgage loans under contracts to be sold in the secondary market. In most cases, loans in this category are sold within 30 days of closing. Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. An estimation of mortgage repurchase losses is reviewed on a quarterly basis.  The representations and warranties in our loan sale agreements provide that we repurchase or indemnify the investors for losses or costs on loans we sell under certain limited conditions.  Some of these conditions include underwriting errors or omissions, fraud or material misstatements by the borrower in the loan application or invalid market value on the collateral property due to deficiencies in the appraisal.  In addition to these representations and warranties, our loan sale contracts define a condition in which the borrower defaults during a short period of time, typically 120 days to one year, as an early payment default, or EPD.  In the event of an EPD, we are required to return the premium paid by the investor for the loan as well as certain administrative fees, and in some cases repurchase the loan or indemnify the investor.  Because the level of mortgage loan repurchase losses depends upon economic factors, investor demand strategies and other external conditions that may change over the life of the underlying loans, the level of the liability for mortgage loan repurchase losses is difficult to estimate and requires considerable management judgment.

The following table demonstrates the activity for the reserve for mortgage repurchase losses for the three and six months ended June 30, 2018 and 2017.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Beginning Balance	$	1,742			2,583			1,892			2,880
Losses paid		—			(4	)		—			(76	)
Provision for mortgage repurchase losses		(150	)		(225	)		(300	)		(450	)
Ending balance	$	1,592			2,354			1,592			2,354

For the three months ended June 30, 2018 and 2017, the Company recorded a recovery of mortgage repurchase losses of $150,000 and $225,000, respectively. For the six months ended June 30, 2018 and 2017, the Company recorded a recovery of mortgage repurchase losses of $300,000 and $450,000, respectively. The recovery of mortgage loan repurchase losses is related to several factors. The Company sells mortgage loans to various third parties, including government-sponsored entities (“GSEs”), under contractual provisions that include various representations and warranties as previously stated. The Company establishes the reserve for mortgage loan repurchase losses based on a combination of factors, including estimated levels of defects on internal quality assurance, default expectations, historical investor repurchase demand and appeals success rates, reimbursement by correspondent and other third party originators, and projected loss severity. As a result of the Company’s analysis of its reserve for mortgage loan repurchase losses, the reserve was reduced accordingly.

Deposits

We provide a range of deposit services, including noninterest-bearing demand accounts, interest-bearing demand and savings accounts, money market accounts and time deposits. These accounts generally pay interest at rates established by management based on competitive market factors and management’s desire to increase or decrease certain types or maturities of deposits. Deposits continue to be our primary funding source. At June 30, 2018, deposits totaled $2.7 billion, an increase from deposits of $2.6 billion at December 31, 2017. The increase in deposits since December 31, 2017 relates to continued efforts to increase our core deposits through business development and seasonal increases in markets affected by tourism.

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The following table shows the average balance amounts and the average rates paid on deposits held by us.

	For the Six Months
	Ended June 30,
	2018					2017
	Average		Average			Average		Average
	Balance		Rate			Balance		Rate
			(Dollars in thousands)
Interest-bearing demand accounts	$	546,616		0.31	%		232,285		0.27	%
Money market accounts		463,831		0.60	%		341,719		0.41	%
Savings accounts		209,306		0.25	%		61,012		0.19	%
Certificates of deposit less than $100,000		428,812		1.16	%		278,896		0.90	%
Certificates of deposit of $100,000 or more		452,088		1.31	%		262,868		1.11	%
Total interest-bearing average deposits		2,100,653					1,176,780
Noninterest-bearing deposits		546,523					305,265
Total average deposits	$	2,647,176					1,482,045

The maturity distribution of our time deposits of $100,000 or more is as follows:

	At June 30, 2018
	(In thousands)
Three months or less	$	80,473
Over three through nine months		65,097
Over six through twelve months		146,925
Over twelve months		164,272
Total certificates of deposits	$	456,767

Borrowings

The followings table outlines our various sources of short-term borrowed funds during the three and six months ended June 30, 2018 and 2017 and the amounts outstanding at the end of each period, the maximum amount for each component during the periods, the average amounts for each period, and the average interest rate that we paid for each borrowings source. The maximum month-end balance represents the high indebtedness for each component of borrowed funds at any time during each of the periods shown.

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					Maximum		Average for the
			Contractual		Month		Period including
	Ending		Period End		End		Fair Value Amortization
	Balance		Rate		Balance		Balance		Rate
At or for the three months ended June 30, 2018	(Dollars in thousands)
Short-term borrowed funds
Short-term FHLB advances	$	354,500		1.04% -2.71%		408,500		362,874		1.88	%
Long-term borrowed funds
Long-term FHLB advances, due 2018 through 2020		14,000		1.62% -2.09%		35,000		34,539		1.30	%
Subordinated debentures, due 2032 through 2037		32,347		4.09% -5.26%		32,347		32,324		6.29	%
					Maximum		Average for the
			Contractual		Month		Period including
	Ending		Period End		End		Fair Value Amortization
	Balance		Rate		Balance		Balance		Rate
At or for the three months ended June 30, 2017			(Dollars in thousands)
Short-term borrowed funds
Short-term FHLB advances	$	149,000		0.83% - 2.28%		192,000		170,333		1.01	%
Long-term borrowed funds
Long-term FHLB advances, due 2017 through 2021		52,000		1.00% - 2.71%		52,000		40,918		2.15	%
Subordinated debentures, due 2032 through 2034		23,327		2.90% - 4.50%		23,327		23,316		4.76	%
					Maximum		Average for the
			Contractual		Month		Period including
	Ending		Period End		End		Fair Value Amortization
	Balance		Rate		Balance		Balance		Rate
At or for the six months ended June 30, 2018	(Dollars in thousands)
Short-term borrowed funds
Short-term FHLB advances	$	354,500		1.04% -2.71%		408,500		346,773		1.72	%
Long-term borrowed funds
Long-term FHLB advances, due 2019 through 2020		14,000		1.62% -2.09%		42,500		37,047		1.64	%
Subordinated debentures, due 2032 through 2037		32,347		4.09% -5.26%		32,347		32,303		6.04	%
					Maximum		Average for the
				Contractual	Month		Period including
	Ending			Period End	End		Fair Value Amortization
	Balance			Rate	Balance		Balance		Rate
At or for the six months ended June 30, 2017				(Dollars in thousands)
Short-term borrowed funds
Short-term FHLB advances	$	149,000		0.83% - 2.28%		214,500		175,238		0.89	%
Long-term borrowed funds
Long-term FHLB advances, due 2017 through 2021		52,000		1.00% - 2.71%		52,000		25,597		3.06	%
Subordinated debentures, due 2032 through 2034		23,327		2.90% - 4.50%		23,327		19,980		4.60	%

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Liquidity

Liquidity represents the ability of a company to convert assets into cash or cash equivalents without significant loss, and the ability to raise additional funds by increasing liabilities. Liquidity management involves monitoring our sources and uses of funds in order to meet our day-to-day cash flow requirements while maximizing profits. Liquidity management is made more complicated because different balance sheet components are subject to varying degrees of management control. For example, the timing of maturities of our investment portfolio is fairly predictable and subject to a high degree of control at the time investment decisions are made. However, net deposit inflows and outflows are far less predictable and are not subject to the same degree of control.

The Company utilizes borrowing facilities in order to maintain adequate liquidity including: the FHLB of Atlanta, the Federal Reserve Bank (“FRB”), and federal funds purchased. The Company also uses wholesale deposit products, including brokered deposits as well as national certificate of deposit services. Additionally, the Company has certain investment securities classified as available-for-sale that are carried at market value with changes in market value, net of tax, recorded through stockholders’ equity.

Lines of credit with the FHLB of Atlanta are based upon FHLB-approved percentages of Bank assets, but must be supported by appropriate collateral to be available. The Company has pledged first lien residential mortgage, second lien residential mortgage, residential home equity line of credit, commercial mortgage and multifamily mortgage portfolios under blanket lien agreements. At June 30, 2018, the Company had FHLB advances of $368.5 million outstanding with excess collateral pledged to the FHLB during those periods that would support additional borrowings of approximately $475.0 million.

Lines of credit with the FRB are based on collateral pledged. At June 30, 2018 the Company had lines available with the FRB for $192.9 million. At June 30, 2018 the Company had no FRB advances outstanding.

Capital Resources  

The Company and the Bank are subject to various federal and state regulatory requirements, including regulatory capital requirements. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions that if undertaken could have a direct material effect on the Company’s and the Bank’s financial statements.

Effective January 2, 2015, the Company and Bank became subject to the regulatory risk-based capital rules adopted by the federal banking agencies implementing Basel III. Under the new capital guidelines, applicable regulatory capital components consist of (1) common equity Tier 1 capital (common stock, including related surplus, and retained earnings, plus limited amounts of minority interest in the form of common stock, net of goodwill and other intangibles (other than mortgage servicing assets), deferred tax assets arising from net operating loss and tax credit carry forwards above certain levels, mortgage servicing rights above certain levels, gain on sale of securitization exposures and certain investments in the capital of unconsolidated financial institutions, and adjusted by unrealized gains or losses on cash flow hedges and accumulated other comprehensive income items (subject to the ability of a non-advanced approaches institution to make a one-time irrevocable election to exclude from regulatory capital most components of AOCI), (2) additional Tier 1 capital (qualifying non-cumulative perpetual preferred stock, including related surplus, plus qualifying Tier 1 minority interest and, in the case of holding companies with less than $15 billion in consolidated assets at December 31, 2009, certain grandfathered trust preferred securities and cumulative perpetual preferred stock in limited amounts, net of mortgage servicing rights, deferred tax assets related to temporary timing differences, and certain investments in financial institutions) and (3) Tier 2 capital (the allowance for loan and lease losses in an amount not exceeding 1.25% of standardized risk-weighted assets, plus qualifying preferred stock, qualifying subordinated debt and qualifying total capital minority interest, net of Tier 2 investments in financial institutions). Total Tier 1 capital, plus Tier 2 capital, constitutes total risk-based capital.

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The required minimum ratios are as follows:

· Common equity Tier 1 capital ratio (common equity Tier 1 capital to total risk-weighted assets) of 4.5%

· Tier 1 Capital Ratio (Tier 1 capital to total risk-weighted assets) of 6%

· Total capital ratio (total capital to total risk-weighted assets) of 8%; and

· Leverage ratio (Tier 1 capital to average total consolidated assets) of 4%

The new capital guidelines also provide that all covered banking organizations must maintain a new capital conservation buffer of common equity Tier 1 capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonus payments to executive officers. The phase-in of the capital conservation buffer requirement began on January 1, 2016.

The final regulatory capital rules also incorporate these changes in regulatory capital into the prompt corrective action framework, under which the thresholds for “adequately capitalized” banking organizations are equal to the new minimum capital requirements. Under this framework, in order to be considered “well capitalized”, insured depository institutions are required to maintain a Tier 1 leverage ratio of 5%, a common equity Tier 1 risk-based capital measure of 6.5%, a Tier 1 risked-based capital ratio of 8% and a total risk-based capital ratio of 10%.

On June 11, 2018, the Company completed the sale of 1.5 million shares of its common stock. The net proceeds of the offering to the Company, after estimated expenses, were approximately $63.0 million.

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The actual capital amounts and ratios as well as minimum amounts for each regulatory defined category for the Company and the Bank at June 30, 2018 and December 31, 2017 are as follows:

																To Be Well
						Minimum Capital					Minimum Capital					Capitalized Under
						Required - Basel III					Required - Basel III					Prompt Corrective
	Actual					Phase-In Schedule					Fully Phased-In					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
	(Dollars in thousands)
June 30, 2018
Carolina Financial Corporation
CET1 capital (to risk weighted assets)	$	406,729		14.77	%		175,556		6.375	%		192,768		7.000	%		N/A		N/A
Tier 1 capital (to risk weighted assets)		437,960		15.90	%		216,863		7.875	%		234,075		8.500	%		N/A		N/A
Total capital (to risk weighted assets)		450,947		16.38	%		271,940		9.875	%		289,151		10.500	%		N/A		N/A
Tier 1 capital (to total average assets)		437,960		12.58	%		139,272		4.000	%		139,272		4.000	%		N/A		N/A
CresCom Bank
CET1 capital (to risk weighted assets)		430,792		15.66	%		175,412		6.375	%		192,610		7.000	%		178,852		6.50	%
Tier 1 capital (to risk weighted assets)		430,792		15.66	%		216,686		7.875	%		233,883		8.500	%		220,125		8.00	%
Total capital (to risk weighted assets)		443,779		16.13	%		271,717		9.875	%		288,914		10.500	%		275,157		10.00	%
Tier 1 capital (to total average assets)		430,792		12.37	%		139,288		4.000	%		139,288		4.000	%		174,110		5.00	%
December 31, 2017
Carolina Financial Corporation
CET1 capital (to risk weighted assets)	$	328,511		12.42	%		152,145		5.750	%		185,220		7.000	%		N/A		N/A
Tier 1 capital (to risk weighted assets)		359,654		13.59	%		191,835		7.250	%		224,910		8.500	%		N/A		N/A
Total capital (to risk weighted assets)		371,133		14.03	%		244,755		9.250	%		277,830		10.500	%		N/A		N/A
Tier 1 capital (to total average assets)		359,654		12.38	%		116,198		4.000	%		116,198		4.000	%		N/A		N/A
CresCom Bank
CET1 capital (to risk weighted assets)		355,024		13.43	%		152,035		5.750	%		185,086		7.000	%		171,865		6.50	%
Tier 1 capital (to risk weighted assets)		355,024		13.43	%		191,696		7.250	%		224,747		8.500	%		211,527		8.00	%
Total capital (to risk weighted assets)		366,503		13.86	%		244,578		9.250	%		277,629		10.500	%		264,408		10.00	%
Tier 1 capital (to total average assets)		355,024		12.21	%		116,312		4.000	%		116,312		4.000	%		145,390		5.00	%

The following table provides the amount of dividends and dividend payout ratios (dividends declared divided by net income) for the three and six months ended June 30, 2018 and 2017.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Dividends declared	$	1,355			646			2,407			1,222
Dividend payout ratios		9.05	%		6.92	%		12.65	%		8.58	%

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Off Balance Sheet Arrangements

Through the operations of our Bank, we have made contractual commitments to extend credit in the ordinary course of our business activities. These commitments are legally binding agreements to lend money to our customers at predetermined interest rates for a specified period of time. We evaluate each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by us upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include accounts receivable, inventory, property, plant and equipment, commercial and residential real estate. We manage the credit risk on these commitments by subjecting them to normal underwriting and risk management processes.

At June 30, 2018, we had issued commitments to extend credit and standby letters of credit of approximately $392.9 million through various types of lending arrangements.  There were 63 standby letters of credit included in the commitments for $14.3 million. Total fixed rate commitments were $95.2 million and variable rate commitments were $297.7 million.

Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. A significant portion of the unfunded commitments relate to consumer equity lines of credit and commercial lines of credit. Based on historical experience, we anticipate that a portion of these lines of credit will not be funded.

Except as disclosed in this report, we are not involved in off-balance sheet contractual relationships, unconsolidated related entities that have off-balance sheet arrangements or transactions that could result in liquidity needs or other commitments that significantly impact earnings.

Market Risk Management and Interest Rate Risk

The effective management of market risk is essential to achieving the Company’s objectives. As a financial institution, the Company’s most significant market risk exposure is interest rate risk. The primary objective of managing interest rate risk is to minimize the effect that changes in interest rates have on net income. This is accomplished through active asset and liability management, which requires the strategic pricing of asset and liability accounts and management of appropriate maturity mixes of assets and liabilities. The expected result of these strategies is the development of appropriate maturity and re-pricing opportunities in those accounts to produce consistent net income during periods of changing interest rates. The Bank’s asset/liability management committee, or ALCO, monitors loan, investment and liability portfolios to ensure comprehensive management of interest rate risk. These portfolios are analyzed for proper fixed-rate and variable-rate mixes under various interest rate scenarios. The asset/liability management process is designed to achieve relatively stable net interest margins and assure liquidity by coordinating the volumes, maturities or re-pricing opportunities of interest-earning assets, deposits and borrowed funds. It is the responsibility of the ALCO to determine and achieve the most appropriate volume and mix of interest-earning assets and interest-bearing liabilities, as well as ensure an adequate level of liquidity and capital, within the context of corporate performance goals. The ALCO meets regularly to review the Company’s interest rate risk and liquidity positions in relation to present and prospective market and business conditions, and adopts funding and balance sheet management strategies that are intended to ensure that the potential impact on earnings and liquidity as a result of fluctuations in interest rates is within acceptable standards. The Board of Directors also sets policy guidelines and establishes long-term strategies with respect to interest rate risk exposure and liquidity.

The Company uses interest rate sensitivity analysis to measure the sensitivity of projected net interest income to changes in interest rates. Management monitors the Company’s interest sensitivity by means of a computer model that incorporates current volumes, average rates earned and paid, and scheduled maturities, payments of asset and liability portfolios, together with multiple scenarios of prepayments, repricing opportunities and anticipated volume growth. Interest rate sensitivity analysis shows the effect that the indicated changes in interest rates would have on net interest income as projected for the next 12 months under the current interest rate environment. The resulting change in net interest income reflects the level of sensitivity that net interest income has in relation to changing interest rates.

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As of June 30, 2018, the following table summarizes the forecasted impact on net interest income using a base case scenario given upward movements in interest rates of 100, 200, and 300 basis points based on forecasted assumptions of prepayment speeds, nominal interest rates and loan and deposit repricing rates. Estimates are based on current economic conditions, historical interest rate cycles and other factors deemed to be relevant. However, underlying assumptions may be impacted in future periods which were not known to management at the time of the issuance of the consolidated financial statements. Therefore, management’s assumptions may or may not prove valid. No assurance can be given that changing economic conditions and other relevant factors impacting our net interest income will not cause actual occurrences to differ from underlying assumptions. In addition, this analysis does not consider any strategic changes to our balance sheet which management may consider as a result of changes in market condition.

			Annualized Hypothetical
Interest Rate Scenario			Percentage Change in
Change	Prime Rate		Net Interest Income
(1.00)%		4.00%		(2.40)%
0.00%		5.00%		0.00%
1.00%		6.00%		0.40%
2.00%		7.00%		1.00%
3.00%		8.00%		1.10%

The primary uses of derivative instruments are related to the mortgage banking activities of the Company. As such, the Company holds derivative instruments, which consist of rate lock agreements related to expected funding of fixed-rate mortgage loans to customers (interest rate lock commitments) and forward commitments to sell mortgage-backed securities and individual fixed-rate mortgage loans. The Company’s objective in obtaining the forward commitments is to mitigate the interest rate risk associated with the interest rate lock commitments and the mortgage loans that are held for sale. Derivatives related to these commitments are recorded as either a derivative asset or a derivative liability in the balance sheet and are measured at fair value. Both the interest rate lock commitments and the forward commitments are reported at fair value, with adjustments recorded in current period earnings within the noninterest income of the consolidated statements of operations.

Derivative instruments not related to mortgage banking activities, including financial futures commitments and interest rate swap agreements that do not satisfy the hedge accounting requirements, are recorded at fair value and are classified with resultant changes in fair value being recognized in noninterest income in the consolidated statement of operations.

When using derivatives to hedge fair value and cash flow risks, the Company exposes itself to potential credit risk from the counterparty to the hedging instrument. This credit risk is normally a small percentage of the notional amount and fluctuates as interest rates change. The Company analyzes and approves credit risk for all potential derivative counterparties prior to execution of any derivative transaction. The Company seeks to minimize credit risk by dealing with highly rated counterparties and by obtaining collateralization for exposures above certain predetermined limits. If significant counterparty risk is determined, the Company would adjust the fair value of the derivative recorded asset balance to consider such risk.

Accounting, Reporting, and Regulatory Matters

Information regarding recent authoritative pronouncements that could impact the accounting, reporting, and/or disclosure of the financial information by the Company are included in Note 1 “Summary of Significant Accounting Polices” in the accompanying financial statements.

Effect of Inflation and Changing Prices

The effect of relative purchasing power over time due to inflation has not been taken into account in our consolidated financial statements. Rather, our financial statements have been prepared on an historical cost basis in accordance with GAAP.

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Unlike most industrial companies, our assets and liabilities are primarily monetary in nature. Therefore, the effect of changes in interest rates will have a more significant impact on our performance than the effect of changing prices and inflation in general. In addition, interest rates may generally increase as the rate of inflation increases, although not necessarily in the same magnitude. As discussed previously, we seek to manage the relationships between interest sensitive assets and liabilities in order to protect against wide rate fluctuations, including those resulting from inflation.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Market Risk Management and Interest Rate Risk, and Liquidity.

Item 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Management, including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our President and Chief Executive Officer and Executive Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the three months ended June 30, 2018, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

We are a party to claims and lawsuits arising in the ordinary course of business. Management is not aware of any material pending legal proceedings against the Company which, if determined adversely, would have a material adverse impact on the Company’s financial position, results of operations or cash flows.

Item 1A. RISK FACTORS.

Investing in shares of our common stock involves certain risks, including those identified and described in Item 1A of our Annual Report on Form 10-K for fiscal years ended December 31, 2017, as well as cautionary statements contained in this Form 10-Q, including those under the caption “Cautionary Note Regarding Any Forward-Looking Statements” set forth in Part I, Item 2 of this Form 10-Q, risks and matters described elsewhere in this Form 10-Q and in our other filings with the SEC.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable

Item 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable

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Item 4. MINE SAFETY DISCLOSURES.

Not applicable

Item 5. OTHER INFORMATION.

Not applicable

Item 6. EXHIBITS.

The exhibits required to be filed as part of this Quarterly Report on Form 10-Q are listed in the Index to Exhibits attached hereto and are incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CAROLINA FINANCIAL CORPORATION
	Registrant
Date: August 9, 2018	/s/ Jerold L. Rexroad
	Jerold L. Rexroad
	President and Chief Executive Officer
	(Principal Executive Officer)
Date: August 9, 2018	/s/ William A. Gehman, III
	William A. Gehman III
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS
Exhibit Number	Description
2.1	Agreement and Plan of Merger by and between Carolina Financial Corporation, CBAC, Inc., and Congaree Bancshares, Inc. dated January 5, 2016.(1)
2.2	Agreement and Plan of Merger by and between Carolina Financial Corporation and Greer Bancshares Incorporated, dated November 7, 2016.(2)
2.3	Agreement and Plan of Merger and Reorganization by and between Carolina Financial Corporation and First South Bancorp, Inc. dated June 9, 2017. (3)
4.1	Restated Certificate of Incorporation.(4)
4.2	Amendment to the Restated Certificate of Incorporation.(5)
4.3	Amendment to Restated Certificate of Incorporation.(6)
4.4	Amended and Restated Bylaws.(7)
4.5	Specimen Common Stock Certificate.(8)
4.6	See Exhibits 4.1, 4.2, 4.3, and 4.4 for provisions of the Restated Certificate of Incorporation and Amended and Restated Bylaws which define the rights of the stockholders.
31.1	Rule 13a-14(a) Certification of the Principal Executive Officer.
31.2	Rule 13a-14(a) Certification of the Principal Financial Officer.
32	Section 1350 Certifications.
101	The following materials from the Quarterly Report on Form 10-Q of Carolina Financial Corporation for the quarter ended June 30, 2018, formatted in eXtensible Business Reporting Language(XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Changes in Stockholders’ Equity, (v) Consolidated Statement of Cash Flows and (vi) Notes to Unaudited Consolidated Financial Statements.
(1)	Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on January 11, 2016.
(2)	Incorporated by reference to Exhibit 2.2 of the Company’s Registration Statement on Form S-3 filed on December 23, 2016.
(3)	Incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on June 15, 2017.
(4)	Incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-3 filed on August 31, 2015.
(5)	Incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement on Schedule 14A filed on March 31, 2016.
(6)	Incorporated by reference to Exhibit A of the Company’s Definitive Proxy Statement on Schedule 14A filed on March 29, 2018.
(7)	Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on May 5, 2016.
(8)	Incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form 10 filed on February 26, 2014.

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EX-31.1

Exhibit 31.1

Rule 13a-14(a) Certification of the Principal Executive Officer.

I, Jerold L. Rexroad, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Carolina Financial Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: August 9, 2018	By:	/s/ Jerold L. Rexroad
		Jerold L. Rexroad
		President and Chief Executive Officer
		(Principal Executive Officer)

80

EX-31.2

Exhibit 31.2

Rule 13a-14(a) Certification of the Principal Financial Officer.

I, William A. Gehman, III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Carolina Financial Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: August 9, 2018	By:	/s/ William A. Gehman III
		William A. Gehman III
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

81

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of Carolina Financial Corporation (the “Company”), each certify that, to his knowledge on the date of this certification:

1. The quarterly report of the Company for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on this date (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jerold L. Rexroad

Jerold L. Rexroad

President and Chief Executive Officer

(Principal Executive Officer)

Date: August 9, 2018

/s/ William A. Gehman III

William A. Gehman III

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: August 9, 2018

82

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 07, 2018
Document And Entity Information
Entity Registrant Name	CAROLINA FINANCIAL CORP
Entity Central Index Key	0000870385
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	Yes
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		22,611,363
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2018

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
ASSETS
Cash and due from banks	$ 27,327	$ 25,254
Interest-bearing cash	54,751	55,998
Cash and cash equivalents	82,078	81,252
Securities available-for-sale (cost of $807,672 at June 30, 2018 and $736,975 at December 31, 2017)	804,968	743,239
Federal Home Loan Bank stock, at cost	19,019	19,065
Other investments	3,429	3,446
Derivative assets	6,001	2,803
Loans held for sale	39,473	35,292
Loans receivable, net of allowance for loan losses of $12,987 at June 30, 2018 and $11,478 at December 31, 2017	2,414,234	2,308,050
Premises and equipment, net	62,530	61,407
Accrued interest receivable	12,664	11,992
Real estate acquired through foreclosure, net	1,726	3,106
Deferred tax assets, net	6,073	2,436
Mortgage servicing rights	23,626	21,003
Cash value life insurance	57,982	57,195
Core deposit intangible	18,003	19,601
Goodwill	127,592	127,592
Other assets	13,693	21,538
Total assets	3,693,091	3,519,017
Liabilities [Abstract]
Noninterest-bearing deposits	577,568	525,615
Interest-bearing deposits	2,131,230	2,079,314
Total deposits	2,708,798	2,604,929
Short-term borrowed funds	354,500	340,500
Long-term debt	46,347	72,259
Derivative liabilities	129	156
Drafts outstanding	10,454	7,324
Advances from borrowers for insurance and taxes	4,558	3,005
Accrued interest payable	1,560	1,126
Reserve for mortgage repurchase losses	1,592	1,892
Dividends payable to shareholders	1,354	1,051
Accrued expenses and other liabilities	12,015	11,394
Total Liability	3,141,307	3,043,636
Stockholders' equity:
Preferred stock, par value $.01; 1,000,000 shares authorized at June 30, 2018 and December 31, 2017; no shares issued or outstanding
Common stock, par value $.01; 50,000,000 shares and 25,000,000 shares authorized at June 30, 2018 and December 31, 2017, respectively; 22,570,182 and 21,022,202 issued and outstanding at June 30, 2018 and December 31, 2017, respectively	226	210
Additional paid-in capital	412,300	348,037
Retained earnings	139,799	123,537
Accumulated other comprehensive income (loss), net of tax	(541)	3,597
Total stockholders' equity	551,784	475,381
Total liabilities and stockholders' equity	$ 3,693,091	$ 3,519,017

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Securities available for sale at cost	$ 807,672	$ 736,975
Loans, allowance for loan losses	$ 12,987	$ 11,478
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	1,000,000	1,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	25,000,000
Common stock, shares issued	22,570,182	21,022,202
Common stock, shares outstanding	22,570,182	21,022,202

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Interest income
Loans	$ 32,753	$ 18,280	$ 64,416	$ 33,247
Investment securities	6,359	3,661	12,066	6,214
Dividends from Federal Home Loan Bank stock	263	115	438	216
Other interest income	102	67	234	115
Total interest income	39,477	22,123	77,154	39,792
Interest expense
Deposits	4,248	2,098	7,891	3,790
Short-term borrowed funds	1,705	429	2,958	784
Long-term debt	619	498	1,269	850
Total interest expense	6,572	3,025	12,118	5,424
Net interest income	32,905	19,098	65,036	34,368
Provision for loan losses	559		559
Net interest income after provision for loan losses	32,346	19,098	64,477	34,368
Noninterest income
Mortgage banking income	4,215	4,289	8,017	7,897
Deposit service charges	1,988	998	4,012	1,856
Net gain (loss) on sale of securities	(746)	621	(1,443)	806
Fair value adjustments on interest rate swaps	451	(69)	1,255	(127)
Net increase in cash value life insurance	385	281	775	492
Mortgage loan servicing income	2,090	1,604	4,114	3,170
Other	2,644	1,081	4,346	1,941
Total noninterest income	11,027	8,805	21,076	16,035
Noninterest expense
Salaries and employee benefits	13,541	9,255	27,210	17,864
Occupancy and equipment	4,094	2,439	7,747	4,621
Marketing and public relations	322	416	698	797
FDIC insurance	265	75	520	175
Recovery of mortgage loan repurchase losses	(150)	(225)	(300)	(450)
Legal expense	157	151	233	216
Other real estate (income) expense, net	105	26	11	45
Mortgage subservicing expense	568	505	1,132	991
Amortization of mortgage servicing rights	889	665	1,868	1,335
Merger related expenses	506	279	15,216	1,599
Other	4,074	2,304	7,635	4,283
Total noninterest expense	24,371	15,890	61,970	31,476
Income before income taxes	19,002	12,013	23,583	18,927
Income tax expense (benefit)	4,036	2,673	4,561	4,684
Net income	$ 14,966	$ 9,340	$ 19,022	$ 14,243
Earnings per common share:
Basic (per share)	$ 0.7	$ 0.58	$ 0.91	$ 0.95
Diluted (per share)	0.7	0.58	0.9	0.94
Dividend (per share)	$ 0.06	$ 0.04	$ 0.11	$ 0.08
Weighted average common shares outstanding:
Basic (in shares)	21,243,094	16,029,332	20,961,182	14,980,349
Diluted (in shares)	21,454,039	16,180,171	21,174,936	15,144,796

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Consolidated Statements Of Comprehensive Income
Net income	$ 14,966	$ 9,340	$ 19,022	$ 14,243
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities	(1,759)	4,650	(8,323)	8,125
Tax effect	440	(1,674)	2,081	(2,925)
Reclassification adjustment for (gain) loss included in earnings	746	(621)	1,443	(806)
Tax effect	(187)	224	(361)	290
Unrealized gain (loss) on interest rate swaps designated as cash flow hedges	356	(389)	1,363	(251)
Tax effect	(89)	140	(341)	90
Other comprehensive income, net of tax	(493)	2,330	(4,138)	4,523
Comprehensive income	$ 14,473	$ 11,670	$ 14,884	$ 18,766

XML

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Beginning Balance at Dec. 31, 2016	$ 125	$ 66,156	$ 98,451	$ (1,542)	$ 163,190
Beginning Balance (in shares) at Dec. 31, 2016	12,548,328
Issuance of common stock, net of offering expenses	$ 18	47,653			47,671
Issuance of common stock, net of offering expenses (in shares)	1,807,143
Stock issued - Greer Bancshares Incorporated acquisition	$ 18	54,205			54,223
Stock issued - Greer Bancshares Incorporated acquisition (in shares)	1,789,523
Stock awards	$ 1	108			109
Stock awards (in shares)	68,385
Vested stock awards surrendered in cashless exercise		(365)	(1,306)		(1,671)
Vested stock awards surrendered in cashless exercise (in shares)	(56,436)
Stock-based compensation expense, net		752			752
Net income			14,243		14,243
Dividends declared to stockholders			(1,222)		(1,222)
Other comprehensive income, net of tax				4,523	4,523
Ending Balance at Jun. 30, 2017	$ 162	168,509	110,166	2,981	281,818
Ending Balance (in shares) at Jun. 30, 2017	16,156,943
Beginning Balance at Dec. 31, 2017	$ 210	348,037	123,537	3,597	475,381
Beginning Balance (in shares) at Dec. 31, 2017	21,022,202
Issuance of common stock, net of offering expenses	$ 15	63,007			63,022
Issuance of common stock, net of offering expenses (in shares)	1,500,000
Stock awards	$ 1	113			114
Stock awards (in shares)	58,005
Vested stock awards surrendered in cashless exercise		(246)	(353)		(599)
Vested stock awards surrendered in cashless exercise (in shares)	(15,089)
Stock options exercised		56			56
Stock options exercised (in shares)	5,064
Stock-based compensation expense, net		1,333			1,333
Net income			19,022		19,022
Dividends declared to stockholders			(2,407)		(2,407)
Other comprehensive income, net of tax				(4,138)	(4,138)
Ending Balance at Jun. 30, 2018	$ 226	$ 412,300	$ 139,799	$ (541)	$ 551,784
Ending Balance (in shares) at Jun. 30, 2018	22,570,182

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash flows from operating activities:
Net income	$ 19,022	$ 14,243
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses	559
Amortization of unearned discount/premiums on investments, net	2,520	1,762
Amortization of deferred loan fees	(981)	(588)
Accretion of acquired loans	(4,817)	(1,451)
Amortization of core deposit intangibles	1,598	302
(Gain) loss on sale of available-for-sale securities, net	1,443	(806)
Mortgage banking income	(8,017)	(7,897)
Originations of loans held for sale	(450,286)	(433,852)
Proceeds from sale of loans held for sale	454,122	437,191
Amortization of fair value adjustments on subordinated debentures	88	31
Recovery of mortgage loan repurchase losses	(300)	(450)
Mortgage repurchase loan losses paid, net of recoveries		(76)
Fair value adjustments on interest rate swaps	(1,255)	127
Stock-based compensation	1,333	752
Increase in cash surrender value of bank owned life insurance	(775)	(492)
Depreciation	2,001	1,219
Loss on disposals of premises and equipment	8	3
(Gain) on sale of real estate acquired through foreclosure	(53)	(21)
Write-down of real estate acquired through foreclosure	126
Originations of mortgage servicing assets	(4,491)	(2,995)
Amortization of mortgage servicing assets	1,868	1,335
Accrued interest receivable	(672)	(568)
Other assets	7,158	(2,276)
Increase (decrease) in:
Accrued interest payable	434	170
Dividends payable to shareholders	303	144
Accrued expenses and other liabilities	(2,041)	(9,511)
Cash flows (used in) provided by operating activities	18,895	(3,704)
Activity in available-for-sale securities:
Purchases	(215,651)	(144,383)
Maturities, payments and calls	57,796	24,591
Proceeds from sales	85,300	81,021
Increase in other investments		(14)
Decrease in Federal Home Loan Bank stock	46	2,122
Increase in loans receivable, net	(101,036)	(61,160)
Purchase of premises and equipment	(3,146)	(2,910)
Proceeds from disposals of premises and equipment	1
Proceeds from sale of real estate acquired through foreclosure	1,398	582
Net cash received for acquisitions		37,764
Cash flows used in investing activities	(175,292)	(62,387)
Cash flows from financing activities:
Net increase in deposit accounts	103,869	94,403
Net increase in Federal Home Loan Bank advances	(12,000)	(53,500)
Net (decrease) increase in drafts outstanding	3,130	(2,354)
Net increase in advances from borrowers for insurance and taxes	1,553	1,626
Cash dividends paid on common stock	(2,407)	(1,078)
Proceeds from exercise of stock options	56
Proceeds from issuance of common stock	63,022	47,671
Cash flows provided by financing activities	157,223	86,768
Net increase (decrease) in cash and cash equivalents	826	20,677
Cash and cash equivalents at beginning of year	81,252	24,352
Cash and cash equivalents at end of year	82,078	45,029
Supplemental disclosure
Cash paid for Interest on deposits and borrowed funds	11,684	4,996
Cash paid for Income taxes paid, net of refunds	63	4,025
Noncash investing and financing activities:
Transfer of loans receivable to real estate acquired through foreclosure	91	757
Acquisitions:
Fair value of tangible assets acquired		380,011
Other intangible assets acquired		4,480
Liabilities assumed		358,866
Net identifiable assets acquired over liabilities assumed		25,625
Common stock issued in acquisition		54,223
Goodwill		$ 33,020

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Carolina Financial Corporation (“Carolina Financial” or the “Company”), incorporated under the laws of the State of Delaware, is a financial holding company with one wholly owned subsidiary, CresCom Bank (the “Bank”). CresCom Bank operates five wholly-owned subsidiaries, Crescent Mortgage Company, Carolina Services Corporation of Charleston (“Carolina Services”), DTFS, Inc., CresCom Insurance, LLC and CresCom Leasing, LLC. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. In consolidation, all material intercompany accounts and transactions have been eliminated. The results of operations of the businesses acquired in transactions accounted for as purchases are included only from the dates of acquisition. All majority-owned subsidiaries are consolidated unless control is temporary or does not rest with the Company.

At June 30, 2018, statutory business trusts (“Trusts”) created or acquired by the Company had outstanding trust preferred securities with an aggregate par value of $36.0 million. The principal assets of the Trusts are $37.1 million of the Company’s subordinated debentures with identical rates of interest and maturities as the trust preferred securities. The Trusts have issued $1.1 million of common securities to the Company and are included in other investments in the accompanying consolidated balance sheets. The Trusts are not consolidated subsidiaries of the Company.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2018. There have been no significant changes to the accounting policies as disclosed in the Company’s Form 10-K.

Management’s Estimates

The financial statements are prepared in accordance with GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, including valuation for impaired loans, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, the valuation of securities, the valuation of derivative instruments, the valuation of assets acquired and liabilities assumed in business combinations, the valuation of mortgage servicing rights, the determination of the reserve for mortgage loan repurchase losses, asserted and unasserted legal claims and deferred tax assets or liabilities. In connection with the determination of the allowance for loan losses and foreclosed real estate, management obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

Management uses available information to recognize losses on loans and foreclosed real estate. However, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses and foreclosed real estate. It is possible that the allowance for loan losses and valuation of foreclosed real estate may change materially in the near term.

Earnings Per Share

Basic earnings per share (“EPS”) represents income available to common stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects additional shares that would have been outstanding if dilutive potential shares had been issued. Potential shares that may be issued by the Company relate solely to outstanding stock options, restricted stock (non-vested shares), restricted stock units (“RSUs”) and warrants, and are determined using the treasury stock method. Under the treasury stock method, the number of incremental shares is determined by assuming the issuance of stock for the outstanding stock options, unvested restricted stock and RSUs, and warrants, reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price for the period of the Company’s stock.

Subsequent Events

Subsequent events are material events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the statement of financial condition but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events were identified that required accrual or disclosure .

Reclassification

Certain reclassifications of accounts reported for previous periods have been made in these consolidated financial statements. Such reclassifications had no effect on stockholders’ equity or the net income as previously reported.

Recently Adopted Accounting Pronouncements

During the first quarter of 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities. The amendments included within this standard, which are applied prospectively, require the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using an exit price notion. Prior to adopting the amendments included in the standard, the Company was allowed to measure fair value under an entry price notion. Refer to Note 8 -Estimated Fair Value of Financial Instruments for more information.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 updates the new revenue standard by clarifying the principal versus agent implementation guidance, but does not change the core principle of the new standard. The updates to the principal versus agent guidance: (i) require an entity to determine whether it is a principal or an agent for each distinct good or service (or a distinct bundle of goods or services) to be provided to the customer; (ii) illustrate how an entity that is a principal might apply the control principle to goods, services, or rights to services, when another party is involved in providing goods or services to a customer and (iii) clarify that the purpose of certain specific control indicators is to support or assist in the assessment of whether an entity controls a good or service before it is transferred to the customer, provide more specific guidance on how the indicators should be considered, and clarify that their relevance will vary depending on the facts and circumstances. The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. The Company has evaluated ASU 2016-08 and 2014-09 and determined that this guidance did not have a material impact on the way the Company currently recognizes revenue or the way it recognizes expenses related to those revenue streams. The Company adopted ASU No. 2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Consistent with the modified retrospective approach, the Company did not adjust prior period amounts.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) (“ASU 2017-09”). ASU 2017-09 provides clarity when applying guidance to a change to the terms or conditions of a share-based payment award. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU No. 2017-09 and its related amendments on its required effective date of January 1, 2018. The amendments will be applied prospectively to an award modified on or after the adoption date. The Company has determined that this guidance did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 amends the requirements of the Derivatives and Hedging Topic of the Accounting Standards Codification (“ASC”) to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Cost (Subtopic 310-20):  Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”).  ASU 2017-08 shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. The amendments do not require an accounting change for securities held at a discount; an entity will continue to amortize to the contractual maturity date the discount related to callable debt securities. The amendments apply to the amortization of premiums on callable debt securities with explicit, non-contingent call features that are callable at fixed prices on preset dates.  For public business entities, ASU 2017-08 is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities, including in an interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendments are adopted.  The Company has determined that this guidance will not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 applies a right-of-use (“ROU”) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification.  For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018.   In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply.   The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s financial statements. The Company expects the new guidance will require these lease arrangements to be recognized on the consolidated statements of condition as a right-of-use asset and a corresponding lease liability. Therefore, the Company’s preliminary evaluation indicates the provisions of ASU No. 2016-02 are expected to impact the Company’s consolidated statements of condition, as well as our regulatory capital ratios. However, the Company continues to evaluate the extent of potential impact the new guidance will have on the Company’s consolidated financial statements. The Company is nearing completion of identifying a complete inventory of arrangements containing a lease and accumulating the lease data necessary to apply the amended guidance. In addition, the Company has obtained new software to aid in the transition to the new leasing guidance.

In January 2017, the FASB issued ASU No. 2017-04, Intangible-Goodwill and other (Topic 350):  Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under Accounting Standards Codification ASC 350 and eliminating Step 2 from the goodwill impairment test.  As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount.  An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those years. The amendments should be adopted prospectively and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company has determined that this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments  (“ASU 2016-13”).  ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.  The CECL model is expected to result in earlier recognition of credit losses.  ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities.  The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.   The Company is continuing to assess the impact that this new guidance will have on its consolidated financial statements through its implementation team. The team has assigned roles and responsibilities, key tasks to complete, and a general timeline to be followed. The implementation team meets periodically to discuss the latest developments and ensure progress is being made. The team also keeps current on evolving interpretations and industry practices related to ASU 2016-13 via webcasts, publications, and conferences. The Company has engaged an outside consultant to assist with the methodology review and validation, as well as other key aspects of implementing the standard. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s consolidated financial statements, in particular the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2018

Acquisitions:

BUSINESS COMBINATION

NOTE 2 – BUSINESS COMBINATIONS

On November 1, 2017, the Company acquired all of the common stock of First South Bancorp, Inc., the holding company for First South Bank (“First South”). Under the terms of the merger agreement, each share of First South common stock was converted into the right to receive 0.5064 shares of the Company’s common stock.

The following table presents a summary of total consideration paid by the Company at the acquisition date (dollars in thousand).

Common stock issued (4,822,540 shares at $36.85 per share)	$	177,711
Cash in lieu of fractional shares and fair value of stock options		983
Total consideration paid	$	178,694

The assets acquired and liabilities assumed from First South were recorded at their fair value as of the closing date of the merger. Fair values were preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values became available. Goodwill of $90.3 million was recorded at the time of the acquisition. The following table summarizes the consideration paid by the Company in the merger with First South and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

	As Reported by			Fair Value			As Recorded by
November 1, 2017	First South			Adjustments			the Company
Assets	(In thousands)
Cash and cash equivalents	$	66,109						66,109
Securities available-for-sale		186,038						186,038
Federal Home Loan Bank stock		1,593						1,593
Loans held for sale		1,282						1,282
Loans receivable		783,779			(24,620	)(a)		759,159
Allowance for loan losses		(9,495	)		9,495	(b)		—
Premises and equipment		10,761			1,500	(c)		12,261
Foreclosed assets		1,922			(556	)(d)		1,366
Core deposit intangible		1,410			11,090	(e)		12,500
Deferred tax asset, net		3,961			238	(f)		4,199
Other assets		33,552			(3,417	)(g)		30,135
Total assets acquired	$	1,080,912			(6,270	)		1,074,642
Liabilities
Deposits	$	952,573			78	(h)		952,651
Borrowings		26,810			(1,439	)(i)		25,371
Other liabilities		8,515			(284	)(j)		8,231
Total liabilities assumed	$	987,898			(1,645	)		986,253
Net identifiable assets acquired over liabilities assumed								88,389
Total consideration paid								178,694
Goodwill							$	90,305

Explanation of fair value adjustments:

(a)	Represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.
(b)	Reflects the elimination of First South’s historical allowance for loan losses.
(c)	Reflects fair value adjustments on acquired branch and administrative offices based on the Company’s assessment.
(d)	Reflects the impact of acquisition accounting fair value adjustments.
(e)	Reflects the fair value adjustment to record the estimated core deposit intangible based on the Company’s assessment.
(f)	Reflects the tax impact of acquisition accounting fair value adjustments.
(g)	Reflects the fair value adjustment based on the Company’s evaluation of acquired other assets.
(h)	Represents the fair value adjustment due to interest rate factors.
(i)	Represents the fair value adjustment due to interest rate factors. (j) Reflects the fair value adjustment based on the Company’s evaluation of acquired other liabilities.

Acquisition of Greer Bancshares Incorporated

On March 18, 2017, the Company completed its acquisition of Greer Bancshares Incorporated (“Greer”), the holding company for Greer State Bank. Under the terms of the merger agreement, each share of Greer common stock was converted into the right to receive $18.00 in cash or 0.782 shares of the Company’s common stock, or a combination thereof, subject to certain limitations.

The following table presents a summary of total consideration paid by the Company at the acquisition date (dollars in thousand).

Common stock issued (1,789,523 shares at $30.30 per share)	$	54,223
Cash payments to common stockholders		4,422
Total consideration paid	$	58,645

The assets acquired and liabilities assumed from Greer were recorded at their fair value as of the closing date of the merger. Fair values were preliminary and subject to refinement for up to one year after the closing date of the acquisition as additional information regarding the closing date fair values became available. Goodwill of $33.0 million was recorded at the time of the acquisition. The following table summarizes the consideration paid by the Company in the merger with Greer and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

	As Reported			Fair Value			As Recorded by
March 18, 2017	by Greer			Adjustments			the Company
Assets	(In thousands)
Cash and cash equivalents	$	42,187			—			42,187
Securities available for sale		121,374			—			121,374
Loans held for sale		105			—			105
Loans receivable		205,209			(10,559	)(a)		194,650
Allowance for loan losses		(3,198	)		3,198	(b)		—
Premises and equipment		3,928			4,202	(c)		8,130
Foreclosed assets		42			—			42
Core deposit intangible		—			4,480	(d)		4,480
Deferred tax asset, net		3,831			(1,434	)(e)		2,397
Other assets		11,367			(241	)(f)		11,126
Total assets acquired	$	384,845			(354	)		384,491
Liabilities
Deposits	$	310,866			200	(g)		311,066
Borrowings		43,712			(3,510	)(h)		40,202
Other liabilities		7,086			512	(i)		7,598
Total liabilities assumed	$	361,664			(2,798	)		358,866
Net identifiable assets acquired over liabilities assumed								25,625
Total consideration paid								58,645
Goodwill							$	33,020

Explanation of fair value adjustments:
(a)	Adjustment represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.
(b)	Adjustment reflects the elimination of Greer’s historical allowance for loan losses.
(c)	Adjustment reflects fair value adjustments on acquired branch and administrative offices based on third party appraisals.
(d)	Adjustment reflects the fair value adjustment to record the estimated core deposit intangible based on the Company’s third party valuation report.
(e)	Adjustment reflects the tax impact of acquisition accounting fair value adjustments.
(f)	Adjustment reflects the fair value adjustment based on the Company’s evaluation of acquired other assets.
(g)	Adjustment represents the fair value adjustment due to interest rate factors.
(h)	Adjustment represents the fair value adjustment due to interest rate factors.
(i)	Adjustment reflects the fair value adjustment based on the Company’s evaluation of acquired other liabilities.

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SECURITIES

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

SECURITIES

NOTE 3 – SECURITIES

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of securities available-for-sale at June 30, 2018 and December 31, 2017 follows:

	June 30, 2018									December 31, 2017
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Securities available-for-sale:	(In thousands)
Municipal securities	$	200,526		2,508		(1,457	)		201,577		240,904		6,790		(344	)		247,350
US government agencies		13,000		—		(55	)		12,945		11,983		34		(9	)		12,008
Collateralized loan obligations		172,154		404		(50	)		172,508		128,080		581		(18	)		128,643
Corporate securities		6,902		90		(4	)		6,989		6,891		115		—			7,006
Mortgage-backed securities:
Agency		236,826		504		(3,574	)		233,757		243,075		1,234		(714	)		243,595
Non-agency		167,028		540		(1,684	)		165,884		94,834		551		(260	)		95,125
Total mortgage-backed securities		403,854		1,044		(5,258	)		399,641		337,909		1,785		(974	)		338,720
Trust preferred securities		11,236		1,757		(1,686	)		11,308		11,208		1,132		(2,828	)		9,512
Total	$	807,672		5,803		(8,510	)		804,968		736,975		10,437		(4,173	)		743,239

The Company had no held-to-maturity securities as of June 30, 2018 or December 31, 2017.

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2018 follows:

	At June 30, 2018
	Amortized		Fair
	Cost		Value
	(In thousands)
Securities available-for-sale:
Less than one year	$	309		309
One to five years		9,161		9,149
Six to ten years		111,914		111,531
After ten years		686,288		683,979
Total	$	807,672		804,968

The contractual maturity dates of the securities were used for mortgage-backed securities and asset-backed securities. No estimates were made to anticipate principal repayments.

The following table summarizes the gross realized gains and losses from sales of investment securities available-for-sale for the periods indicated.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Proceeds	$	34,122			43,324			85,300			81,021
Realized gains	$	55			647			69			1,020
Realized losses		(801	)		(26	)		(1,512	)		(214	)
Total investment securities gains (losses), net	$	(746	)		621			(1,443	)		806

At June 30, 2018, the Company had pledged securities with a market value of $89.4 million as collateral for Federal Home Loan Bank (“FHLB”) advances.

At June 30, 2018, the Company has pledged $178.4 million of securities to secure public agency funds.

At June 30, 2018, the Company had $192.9 million of loans pledged for FRB advances.

The following tables summarize gross unrealized losses on investment securities and the fair market value of the related securities at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	At June 30, 2018
	Less than 12 Months							12 Months or Greater							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
	(In thousands)
Available-for-sale:
Municipal securities	$	80,659		79,430		(1,229	)		3,574		3,346		(228	)		84,233		82,776		(1,457	)
US government agencies		13,000		12,945		(55	)		—		—		—			13,000		12,945		(55	)
Collateralized loan obligations		57,909		57,859		(50	)		—		—		—			57,909		57,859		(50	)
Corporate securities		479		475		(4	)		—		—		—			479		475		(4	)
Mortgage-backed securities:
Agency		170,067		167,006		(3,061	)		19,824		19,311		(513	)		189,891		186,317		(3,574	)
Non-agency		100,771		99,166		(1,605	)		10,691		10,613		(78	)		111,462		109,779		(1,684	)
Total mortgage-backed securities		270,838		266,172		(4,666	)		30,515		29,924		(591	)		301,353		296,096		(5,258	)
Trust preferred securities		—		—		—			8,467		6,781		(1,686	)		8,467		6,781		(1,686	)
Total	$	422,885		416,881		(6,004	)		42,556		40,051		(2,505	)		465,441		456,932		(8,510	)
	At December 31, 2017
	Less than 12 Months							12 Months or Greater							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
	(In thousands)
Available-for-sale:
Municipal securities	$	23,849		23,631		(218	)		3,606		3,480		(126	)		27,455		27,111		(344	)
US government agencies		1,681		1,672		(9	)		—		—		—			1,681		1,672		(9	)
Collateralized loan obligations		23,000		22,982		(18	)		—		—		—			23,000		22,982		(18	)
Mortgage-backed securities:
Agency		107,501		107,011		(490	)		17,484		17,260		(224	)		124,985		124,271		(714	)
Non-agency		21,874		21,704		(170	)		9,889		9,799		(90	)		31,763		31,503		(260	)
Total mortgage-backed securities		129,375		128,715		(660	)		27,373		27,059		(314	)		156,748		155,774		(974	)
Trust preferred securities		—		—		—			8,516		5,688		(2,828	)		8,516		5,688		(2,828	)
Total	$	177,905		177,000		(905	)		39,495		36,227		(3,268	)		217,400		213,227		(4,173	)

The Company reviews its investment securities portfolio at least quarterly and more frequently when economic conditions warrant, assessing whether there is any indication of other-than-temporary impairment (“OTTI”). Factors considered in the review include estimated future cash flows, length of time and extent to which market value has been less than cost, the financial condition and near term prospect of the issuer, and our intent and ability to retain the security to allow for an anticipated recovery in market value. If the review determines that there is OTTI, then an impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made, or a portion may be recognized in other comprehensive income. The fair value of investments on which OTTI is recognized then becomes the new cost basis of the investment.

At June 30, 2018 and December 31, 2017, the Company had 221 and 135, respectively, individual investments available-for-sale that were in an unrealized loss position. The unrealized losses on the Company’s investments in US government-sponsored agencies, municipal securities, mortgage-backed securities (agency and non-agency), and trust preferred securities summarized above were attributable primarily to changes in interest rates. Management has performed various analyses, including cash flows testing as needed, and determined that no OTTI expense was necessary during 2018 or 2017.

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DERIVATIVES

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

NOTE 4 – DERIVATIVES

In the ordinary course of business, the Company enters into various types of derivative transactions. For its related mortgage banking activities, the Company holds derivative instruments, which consist of rate lock agreements related to expected funding of fixed-rate mortgage loans to customers (interest rate lock commitments) and forward commitments to sell mortgage-backed securities and individual fixed-rate mortgage loans. The Company’s objective in obtaining the forward commitments is to mitigate the interest rate risk associated with the interest rate lock commitments and the mortgage loans that are held for sale. Derivative instruments not related to mortgage banking activities primarily relate to interest rate swap agreements.

The derivative positions of the Company at June 30, 2018 and December 31, 2017 are as follows:

	At June 30,				At December 31,
	2018				2017
	Fair		Notional		Fair		Notional
	Value		Value		Value		Value
	(In thousands)
Derivative assets:
Cash flow hedges:
Interest rate swaps	$	2,007		70,000		644		45,000
Non-hedging derivatives:
Interest rate swaps		2,007		45,000		964		50,000
Mortgage loan interest rate lock commitments		1,476		126,031		890		98,584
Mortgage-backed securities forward sales commitments		511		25,853		305		23,401
Total derivative assets	$	6,001		266,884		2,803		216,985
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		—		—		95		5,000
Mortgage-backed securities forward sales commitments		129		90,000		61		75,000
Total derivative liabilities	$	129		90,000		156		80,000

Non-Designated Hedges

Derivative Loan Commitments and Forward Sales Commitments

The Company enters into mortgage loan commitments that are also referred to as derivative loan commitments, if the loan that will result from exercise of the commitment will be held for sale upon funding. The Company enters into commitments to fund residential mortgage loans at specified rates and times in the future, with the intention that these loans will subsequently be sold in the secondary market.

Outstanding derivative loan commitments expose the Company to the risk that the price of the loans arising from exercise of the loan commitment might decline from inception of the rate lock to funding of the loan due to increases in mortgage interest rates. If interest rates increase, the value of these loan commitments typically decreases. Conversely, if interest rates decrease, the value of these loan commitments typically increases.

To protect against the price risk inherent in derivative loan commitments, the Company utilizes both “mandatory delivery” and “best efforts” forward loan sale commitments to mitigate the risk of potential decreases in the values of loans that would result from the exercise of the derivative loan commitments.

With a “mandatory delivery” contract, the Company commits to deliver a certain principal amount of mortgage loans to an investor at a specified price on or before a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, it is obligated to pay a “pair-off” fee, based on then-current market prices, to the investor to compensate the investor for the shortfall.

With a “best efforts” contract, the Company commits to deliver an individual mortgage loan of a specified principal amount and quality to an investor if the loan to the underlying borrower closes. Generally, the price the investor will pay the seller for an individual loan is specified prior to the loan being funded (e.g., on the same day the lender commits to lend funds to a potential borrower). The Company expects that these forward loan sale commitments will experience changes in fair value opposite to the change in fair value of derivative loan commitments.

Derivatives related to these commitments are recorded as either a derivative asset or a derivative liability on the balance sheet and are measured at fair value. Both the interest rate lock commitments and the forward commitments are reported at fair value, with adjustments recorded in current period earnings in “mortgage banking income” within noninterest income in the consolidated statements of operations.

Interest Rate Swaps

The Company enters into interest rate swaps that do not meet the hedge accounting requirements and are recorded at fair value as a derivative asset or liability. Interest rate swaps that are not designated as hedges are primarily used to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities including duration mismatches. Fair value changes are recognized in noninterest income as “fair value adjustments on interest rate swaps.”

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using certain interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The Company has entered into interest rate swaps to reduce the exposure to variability in interest-related cash outflows attributable to changes in forecasted LIBOR-based FHLB borrowings. These derivative instruments are designated as cash flow hedges. The hedged item is the LIBOR portion of the series of future adjustable rate borrowings over the term of the interest rate swap. Accordingly, changes to the amount of interest payment cash flows for the hedged transactions attributable to a change in credit risk are excluded from our assessment of hedge effectiveness. The Company tests for hedging effectiveness on a quarterly basis. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company has not recorded any hedge ineffectiveness since inception.

Risk Management Objective of Using Derivatives 

When using derivatives to hedge fair value and cash flow risks, the Company exposes itself to potential credit risk from the counterparty to the hedging instrument. This credit risk is normally a small percentage of the notional amount and fluctuates as interest rates change. The Company analyzes and approves credit risk for all potential derivative counterparties prior to execution of any derivative transaction. The Company seeks to minimize credit risk by dealing with highly rated counterparties and by obtaining collateralization for exposures above certain predetermined limits. If significant counterparty risk is determined, the Company would adjust the fair value of the derivative recorded asset balance to consider such risk. 

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LOANS RECEIVABLE, NET

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

LOANS RECEIVABLE, NET

NOTE 5 - LOANS RECEIVABLE, NET

We emphasize a range of lending services, including commercial and residential real estate mortgage loans, real estate construction loans, commercial and industrial loans, commercial leases, and consumer loans. Our customers are generally individuals and small to medium-sized businesses and professional firms that are located in or conduct a substantial portion of their business in our market areas. We have focused our lending activities primarily on the professional market, including doctors, dentists, small business to medium-sized owners and commercial real estate developers. 

Certain credit risks are inherent in making loans. These include prepayment risks, risks resulting from uncertainties in the future value of collateral, risks resulting from changes in economic and industry conditions, and risks inherent in dealing with individual borrowers. We attempt to mitigate repayment risks by adhering to internal credit policies and procedures. These policies and procedures include officer and customer lending limits, with approval processes for larger loans, documentation examination, and follow-up procedures for any exceptions to credit policies. Our loan approval policies provide for various levels of officer lending authority. When the amount of aggregate loans to a single borrower exceeds the maximum senior officer’s lending authority, the loan request will be considered by the management loan committee, or MLC, which is comprised of four members, all of whom are part of the senior management team of the Bank. The MLC meets weekly to approve loans with total loan commitment relationships generally exceeding $2.5 million. The loan authority of the MLC is equal to two-thirds of the legal lending limit of the Bank which is equivalent to the in-house loan limit. Total credit exposure above the in-house limit requires approval by the majority of the board of directors. We do not make any loans to any director, executive officer of the Bank, or the related interests of each, unless the loan is approved by the full Board of Directors of the Bank and is on terms not more favorable than would be available to a person not affiliated with the Bank. 

The following is a description of the risk characteristics of the material loan portfolio segments: 

Residential Mortgage Loans and Home Equity Loans. We generally originate and hold short-term and long-term first mortgages and traditional second mortgage residential real estate loans. Generally, we limit the loan-to-value ratio on our residential real estate loans to 80%. Loans over 80% LTV generally require private mortgage insurance. We offer fixed and adjustable rate residential real estate loans with terms of up to 30 years. We also offer a variety of lot loan options to consumers to purchase the lot on which they intend to build their home. The options available depend on whether the borrower intends to begin building within 12 months of the lot purchase or at an undetermined future date. We also offer traditional home equity loans and lines of credit. Our underwriting criteria for, and the risks associated with, home equity loans and lines of credit are generally the same as those for first mortgage loans. Home equity loans typically have terms of 10 years or less. 

Commercial Real Estate. Commercial real estate loans generally have terms of five years or less, although payments may be structured on a longer amortization basis. We evaluate each borrower on an individual basis and attempt to determine their business risks and credit profile. We attempt to reduce credit risk in the commercial real estate portfolio by emphasizing loans on owner-occupied office and retail buildings where the loan-to-value ratio, established by independent appraisals, generally does not exceed 80%. We also generally require that a borrower’s cash flow exceed 120% of monthly debt service obligations. In order to ensure secondary sources of payment and liquidity to support a loan request, we typically review all of the personal financial statements of the principal owners and require their personal guarantees.

Real Estate Construction and Development Loans. We offer fixed and adjustable rate residential and commercial construction loan financing to builders and developers and to consumers who wish to build their own home. The term of construction and development loans generally is limited to 18 months, although payments may be structured on a longer amortization basis. Most loans will mature and require payment in full upon the sale of the property. We believe that construction and development loans generally carry a higher degree of risk than long-term financing of existing properties because repayment depends on the ultimate completion of the project and usually on the subsequent sale of the property. We attempt to reduce risk associated with construction and development loans by obtaining personal guarantees and by keeping the maximum loan-to-value ratio at or below 65%-80% of the lesser of cost or appraised value, depending on the project type. Generally, we do not have interest reserves built into loan commitments but require periodic cash payments for interest from the borrower’s cash flow. 

Commercial Loans. We make loans for commercial purposes in various lines of businesses, including the manufacturing industry, service industry, and professional service areas. Commercial loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or if they are secured, the value of the collateral may be difficult to assess and more likely to decrease than real estate. Equipment loans typically will be made for a term of 10 years or less at fixed or variable rates, with the loan fully amortized over the term and secured by the financed equipment. Generally, we limit the loan-to-value ratio on these loans to 75% of cost. Working capital loans typically have terms not exceeding one year and usually are secured by accounts receivable, inventory, or personal guarantees of the principals of the business. For loans secured by accounts receivable or inventory, principal will typically be repaid as the assets securing the loan are converted into cash, and in other cases principal will typically be due at maturity. Trade letters of credit, standby letters of credit, and foreign exchange will generally be handled through a correspondent bank as agent for the Bank. 

The Company’s primary markets are generally concentrated in real estate lending. However, in order to diversify our lending portfolio, the Company purchases nationally syndicated commercial and industrial loans. These loans typically have terms of seven years and are generally tied to a floating rate index such as LIBOR or prime. To effectively manage this line of business, the Company has an experienced senior lending executive with relevant experience to manage this area of this segment of the loan portfolio. In addition, the Company engaged a consulting firm that specializes in syndicated loans to assist in monitoring performance analytics. As of June 30, 2018 and December 31, 2017, there were approximately $89.3 million and $75.0 million in broadly syndicated loans outstanding. Syndicated loans are grouped within commercial business loans below. 

The Bank began originating leases, primarily on equipment utilized for business purposes, as a result of the First South acquisition. Lease terms generally range from 12 to 60 months and include options to purchase the leased equipment at the end of the lease. Most leases provide 100% of the cost of the equipment and are secured by the leased equipment. The Company requires the leased equipment to be insured and that we be listed as a loss payee and named as an additional insured on the insurance policy. We manage credit risk associated with our lease financing loan class based upon the dollar amount of the lease and the level of credit risk. We follow a formal review process that entails analysis of the following factors: equipment value/residual value, exposure levels, jurisdiction risk, industry risk, guarantor requirements, and regulatory compliance. As of June 30, 2018 and December 31, 2017, there were approximately $25.8 million and $24.0 million in lease receivables outstanding. Lease receivables are grouped within commercial business loans below. 

Consumer Loans. We make a variety of loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. Consumer loans are underwritten based on the borrower’s income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. Our installment loans generally amortize over periods up to 72 months. Although we typically require monthly payments of interest and a portion of the principal on our loan products, we will offer consumer loans with a single maturity date when a specific source of repayment is available. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value than real estate.

Loans receivable, net at June 30, 2018 and December 31, 2017 are summarized by category as follows:

	At June 30,					At December 31,
	2018					2017
			% of Total					% of Total
All Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	699,435		28.82	%		665,774		28.70	%
Home equity		87,946		3.62	%		90,141		3.89	%
Commercial real estate		940,558		38.75	%		933,820		40.26	%
Construction and development		327,778		13.50	%		294,793		12.71	%
Consumer loans		16,041		0.66	%		19,990		0.86	%
Commercial business loans		355,463		14.65	%		315,010		13.58	%
Total gross loans receivable		2,427,221		100.00	%		2,319,528		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,414,234					2,308,050

Loans receivable, net at June 30, 2018 and December 31, 2017 for purchased non-credit impaired loans and nonacquired loans are summarized by category as follows:

	At June 30,					At December 31,
	2018					2017
Purchased Non-Credit Impaired Loans			% of Total					% of Total
(ASC 310-20) and Nonacquired Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	689,934		29.20	%		654,597		29.21	%
Home equity		87,855		3.72	%		89,961		4.01	%
Commercial real estate		901,372		38.15	%		891,469		39.77	%
Construction and development		320,902		13.58	%		287,437		12.83	%
Consumer loans		15,963		0.68	%		19,895		0.89	%
Commercial business loans		346,677		14.67	%		297,754		13.29	%
Total gross loans receivable		2,362,703		100.00	%		2,241,113		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,349,716					2,229,635

Loans receivable, net at June 30, 2018 for purchased credit impaired loans are summarized by category below.

	At June 30,					At December 31,
	2018					2017
Purchased Credit Impaired			% of Total					% of Total
Loans (ASC 310-30):	Amount		Loans			Amount		Loans
	(Dollars in thousands)					(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	9,501		14.73	%		11,177		14.25	%
Home equity		91		0.14	%		180		0.23	%
Commercial real estate		39,186		60.14	%		42,351		54.01	%
Construction and development		6,876		10.66	%		7,356		9.38	%
Consumer loans		78		0.11	%		95		0.12	%
Commercial business loans		8,786		13.62	%		17,256		22.01	%
Total gross loans receivable		64,518		100.00	%		78,415		100.00	%
Less:
Allowance for loan losses		—					—
Total loans receivable, net	$	64,518					78,415

Included in the loan totals, net of purchase discount, were $813.7 million and $962.3 million in loans acquired through acquisitions at June 30, 2018 and December 31, 2017, respectively. At June 30, 2018 and December 31, 2017, the purchase discount on purchased non-credit impaired loans was $13.9 million and $17.7 million, respectively. No allowance for loan losses related to the acquired loans is recorded on the acquisition date because the fair value of the loans acquired incorporates assumptions regarding credit risk. 

There are two methods to account for acquired loans as part of a business combination. Acquired loans that contain evidence of credit deterioration on the date of purchase are carried at the net present value of expected future proceeds in accordance with ASC 310-30 and are considered purchased credit impaired (“PCI”) loans. All other acquired loans are recorded at their initial fair value, adjusted for subsequent advances, pay downs, amortization or accretion of any premium or discount on purchase, charge-offs and any other adjustment to carrying value in accordance with ASC 310-20. 

PCI loans are aggregated into pools of loans based on common risk characteristics such as the type of loan, payment status, or collateral type. The Company estimates the amount and timing of expected cash flows for each purchased loan pool and the expected cash flows in excess of the amount paid are recorded as interest income over the remaining life of the pool (accretable yield). The excess of the pool’s contractual principal and interest over expected cash flows is not recorded (nonaccretable difference). 

Over the life of the loan pool, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income. 

At June 30, 2018, the outstanding balance and recorded investment of PCI loans was $79.3 million and $64.5 million, respectively. At December 31, 2017, the outstanding balance and recorded investment of PCI loans was $93.8 million and $78.4 million, respectively,

The following table presents changes in the value of PCI loans receivable for the three and six months ended June 30, 2018:

	For the Three Months		For the Six Months
	Ended June 30, 2018		Ended June 30, 2018
	(In thousands)		(In thousands)
Balance at beginning of period	$	71,030	$	78,415
Net reductions for payments, foreclosures, and accretion		6,512		13,897
Balance at end of period	$	64,518	$	64,518

The following table presents changes in the value of the accretable yield for PCI loans for the three and six months ended June 30, 2018 (in thousands):

	For the Three Months			For the Six Months
	Ended June 30, 2018			Ended June 30, 2018
	(In thousands)			(In thousands)
Accretable yield, beginning of period	$	15,745		$	12,536
Additions		—			—
Accretion		(1,224	)		(2,556	)
Reclassification from nonaccretable balance, net		207			3,403
Other changes, net		(58	)		1,287
Accretable yield, end of period	$	14,670		$	14,670

 The composition of gross loans outstanding, net of undisbursed amounts, by rate type is as follows:

	At June 30,				At December 31,
	2018				2017
	(Dollars in thousands)
Variable rate loans	$	914,923	37.69	%		807,748	34.82	%
Fixed rate loans		1,512,298	62.31	%		1,511,780	65.18	%
Total loans outstanding	$	2,427,221	100.00	%		2,319,528	100.00	%

The following table presents activity in the allowance for loan losses for the period indicated. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Allowance for loan losses:		For the Three Months Ended June 30, 2018
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	3,010			226			4,144			2,032			75			2,873			348			12,708
Provision for loan losses			240			(24	)		205			49			153			(309	)		246			559
Charge-offs			(147	)		—			(52	)		—			(129	)		(27	)		—			(355	)
Recoveries			7			—			42			1			18			6			—			74
Balance, end of period		$	3,110			202			4,339			2,082			117			2,543			594			12,987
		For the Three Months Ended June 30, 2017
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	2,506			236			3,613			943			110			2,498			809			10,715
Provision for loan losses			237			(18	)		(283	)		4			(16	)		359			(283	)		—
Charge-offs			(19	)		—			—			—			(1	)		—			—			(20	)
Recoveries			1			—			1			1			8			44			—			55
Balance, end of period		$	2,725			218			3,331			948			101			2,901			526			10,750
Allowance for loan losses:		For the Six Months Ended June 30, 2018
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	2,719			168			3,986			1,201			79			2,840			485			11,478
Provision for loan losses			526			26			392			(155	)		118			(456	)		109			559
Charge-offs			(147	)		—			(86	)		(1	)		(138	)		(116	)		—			(488	)
Recoveries			12			8			47			1,037			58			275			—			1,437
Balance, end of period		$	3,110			202			4,339			2,082			117			2,543			594			12,987
		For the Six Months Ended June 30, 2017
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
	(In thousands)
Balance, beginning of period		$	2,636			197			3,344			1,132			80			2,805			494			10,688
Provision for loan losses			122			21			(39	)		(186	)		20			30			32			—
Charge-offs			(35	)		—			—			—			(10	)		—			—			(45	)
Recoveries			2			—			26			2			11			66			—			107
Balance, end of period		$	2,725			218			3,331			948			101			2,901			526			10,750

The following table disaggregates our allowance for loan losses and recorded investment in loans by impairment methodology.

	Loans Secured by Real Estate
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
	family		equity		estate		development		Consumer		business		Unallocated		Total
	(In thousands)
At June 30, 2018:
Allowance for loan losses  ending balances:
Individually evaluated for impairment	$	204		29		142		534		—		11		—		920
Collectively evaluated for impairment		2,906		173		4,197		1,548		117		2,532		594		12,067
	$	3,110		202		4,339		2,082		117		2,543		594		12,987
Loans receivable ending balances:
Individually evaluated for impairment	$	3,698		126		4,636		1,840		19		754		—		11,073
Collectively evaluated for impairment		686,236		87,729		896,736		319,062		15,944		345,923		—		2,351,630
Purchased Credit-Impaired Loans		9,501		91		39,186		6,876		78		8,786		—		64,518
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		—		2,427,221
At December 31, 2017:
Allowance for loan losses ending balances:
Individually evaluated for impairment	$	64		29		—		—		—		16		—		109
Collectively evaluated for impairment		2,655		139		3,986		1,201		79		2,824		485		11,369
	$	2,719		168		3,986		1,201		79		2,840		485		11,478
Loans receivable ending balances:
Individually evaluated for impairment	$	3,435		108		4,811		318		26		285		—		8,983
Collectively evaluated for impairment		651,162		89,853		886,658		287,119		19,869		297,469		—		2,232,130
Purchased Credit-Impaired Loans		11,177		180		42,351		7,356		95		17,256		—		78,415
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		—		2,319,528

The following table presents impaired loans individually evaluated for impairment in the segmented portfolio categories and the corresponding allowance for loan losses as of June 30, 2018 and December 31, 2017. The recorded investment is defined as the original amount of the loan, net of any deferred costs and fees, less any principal reductions and direct charge-offs. Unpaid principal balance includes amounts previously included in charge-offs.

	At June 30, 2018						At December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
					(In thousands)
With no related allowance recorded:
Loans secured by real estate:
One-to-four family	$	2,250		2,375		—		2,725		2,846		—
Home equity		68		68		—		—		—		—
Commercial real estate		2,824		2,824		—		3,370		3,370		—
Construction and development		267		267		—		318		318		—
Consumer loans		19		19		—		26		26		—
Commercial business loans		599		599		—		113		114		—
		6,027		6,152		—		6,552		6,674		—
With an allowance recorded:
Loans secured by real estate:
One-to-four family		1,448		1,486		204		710		710		64
Home equity		58		58		29		108		108		29
Commercial real estate		1,812		1,894		142		1,441		1,441		—
Construction and development		1,573		1,573		534		—		—		—
Consumer loans		—		—		—		—		—		—
Commercial business loans		155		155		11		172		172		16
		5,046		5,166		920		2,431		2,431		109
Total:
Loans secured by real estate:
One-to-four family		3,698		3,861		204		3,435		3,556		64
Home equity		126		126		29		108		108		29
Commercial real estate		4,636		4,718		142		4,811		4,811		—
Construction and development		1,840		1,840		534		318		318		—
Consumer loans		19		19		—		26		26		—
Commercial business loans		754		754		11		285		286		16
	$	11,073		11,318		920		8,983		9,105		109

The following table presents the average recorded investment and interest income recognized on impaired loans individually evaluated for impairment in the segmented portfolio categories for the three and six months ended June 30, 2018 and 2017.

	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2018					2017					2018					2017
	Average		Interest			Average		Interest			Average		Interest			Average		Interest
	Recorded		Income			Recorded		Income			Recorded		Income			Recorded		Income
	Investment		Recognized			Investment		Recognized			Investment		Recognized			Investment		Recognized
	(In thousands)
With no related allowance recorded:
Loans secured by real estate:
One-to-four family	$	2,199		(14	)		3,027		(15	)		2,107		2			2,953		21
Home equity		17		—			347		9			8		1			258		12
Commercial real estate		2,971		(31	)		4,016		(37	)		3,012		49			4,043		98
Construction and development		267		5			158		8			267		9			87		8
Consumer loans		20		—			19		—			21		—			19		—
Commercial business loans		183		9			32		(16	)		103		14			35		1
		5,657		(31	)		7,599		(51	)		5,518		75			7,395		140
With an allowance recorded:
Loans secured by real estate:
One-to-four family		1,481		5			992		5			1,489		16			803		8
Home equity		88		(3	)		274		(2	)		96		—			233		(1	)
Commercial real estate		1,839		18			1,009		(67	)		1,793		39			1,014		—
Construction and development		1,447		—			—		—			922		(4	)		—		—
Consumer loans		—					—		—			—		—			—		—
Commercial business loans		159		2			205		—			164		5			211		6
		5,014		22			2,480		(64	)		4,464		56			2,261		13
Total:
Loans secured by real estate:
One-to-four family		3,680		(9	)		4,019		(10	)		3,596		18			3,756		29
Home equity		105		(3	)		621		7			104		1			491		11
Commercial real estate		4,810		(13	)		5,025		(104	)		4,805		88			5,057		98
Construction and development		1,714		5			158		8			1,189		5			87		8
Consumer loans		20		—			19		—			21		—			19		—
Commercial business loans		342		11			237		(16	)		267		19			246		7
	$	10,671		(9	)		10,079		(115	)		9,982		131			9,656		153

A loan is considered past due if the required principal and interest payment has not been received as of the due date. The following schedule is an aging of past due loans receivable by portfolio segment as of June 30, 2018 and December 31, 2017. 

	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
All Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	1,343		567		918		274		239		327		3,668
60-89 days past due		870		164		1,411		52		23		119		2,639
90 days or more past due		2,997		215		611		989		23		750		5,585
Total past due		5,210		946		2,940		1,315		285		1,196		11,892
Current		694,225		87,000		937,618		326,463		15,756		354,267		2,415,329
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221
	At June 30, 2018
Purchased Non-Credit	Real Estate Loans
Impaired Loans (ASC 310-20) and Nonacquired Loans:	One-to- four family		Home equity		Commercial real estate		Construction and development		Consumer		Commercial business		Total
	(In thousands)
30-59 days past due	$	1,264		556		826		274		239		327		3,486
60-89 days past due		798		164		1,411		41		23		119		2,556
90 days or more past due		2,582		210		611		87		23		750		4,263
Total past due		4,644		930		2,848		402		285		1,196		10,305
Current		685,290		86,925		898,524		320,500		15,678		345,481		2,352,398
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
	At June 30, 2018
	Real Estate Loans
Purchased Credit Impaired Loans (ASC 310-30):	One-to- four family		Home equity		Commercial real estate		Construction and development		Consumer		Commercial business		Total
	(In thousands)
30-59 days past due	$	79		11		92		—		—		—		182
60-89 days past due		72		—		—		11		—		—		83
90 days or more past due		415		5		—		902		—		—		1,322
Total past due		566		16		92		913		—		—		1,587
Current		8,935		75		39,094		5,963		78		8,786		62,931
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
All Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	8,139		1,350		1,358		2,328		108		366		13,649
60-89 days past due		1,025		109		421		—		129		185		1,869
90 days or more past due		2,580		117		689		2,482		21		59		5,948
Total past due		11,744		1,576		2,468		4,810		258		610		21,466
Current		654,030		88,565		931,352		289,983		19,732		314,400		2,298,062
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
	At December 31, 2017
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonpurchased Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	7,874		1,319		1,112		2,315		108		366		13,094
60-89 days past due		1,000		109		421		—		129		185		1,844
90 days or more past due		1,894		108		689		1,297		21		59		4,068
Total past due		10,768		1,536		2,222		3,612		258		610		19,006
Current		643,829		88,425		889,247		283,825		19,637		297,144		2,222,107
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113
	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	265		31		246		13		—		—		555
60-89 days past due		25		—		—		—		—		—		25
90 days or more past due		686		9		—		1,185		—		—		1,880
Total past due		976		40		246		1,198		—		—		2,460
Current		10,201		140		42,105		6,158		95		17,256		75,955
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415

Loans are generally placed in nonaccrual status when the collection of principal and interest is 90 days or more past due, unless the obligation is both well-secured and in the process of collection. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest payments received while the loan is on nonaccrual are applied to the principal balance. No interest income was recognized on impaired loans subsequent to the nonaccrual status designation. A loan is returned to accrual status when the borrower makes consistent payments according to contractual terms and future payments are reasonably assured.

The following is a schedule of loans receivable, by portfolio segment, on nonaccrual at June 30, 2018 and December 31, 2017.

	At June 30,		At December 31,
	2018		2017
Loans secured by real estate:	(In thousands)
One-to-four family	$	2,909		1,927
Home equity		231		108
Commercial real estate		2,710		1,540
Construction and development		1,661		51
Consumer loans		100		22
Commercial business loans		812		313
	$	8,423		3,961

The Company uses several metrics as credit quality indicators of current or potential risks as part of the ongoing monitoring of credit quality of its loan portfolio. The credit quality indicators are periodically reviewed and updated on a case-by-case basis. The Company uses the following definitions for the internal risk rating grades, listed from the least risk to the highest risk.

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 Company 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 Company uses the following definitions in the tables below: 

Nonperforming: Loans on nonaccrual status plus loans greater than 90 days past due still accruing interest.

Performing: All current accrual loans plus loans less than 90 days past due.

The following is a schedule of the credit quality of loans receivable, by portfolio segment, as of June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
Total Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	694,822		87,754		915,661		321,280		15,838		348,154		2,383,509
Special Mention		877		7		17,605		3,280		103		4,970		26,842
Substandard		3,736		185		7,292		3,218		100		2,339		16,870
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221
Performing	$	696,111		87,710		937,848		325,215		15,922		354,651		2,417,457
Nonperforming:
90 days past due still accruing		415		5		—		902		19		—		1,341
Nonaccrual		2,909		231		2,710		1,661		100		812		8,423
Total nonperforming		3,324		236		2,710		2,563		119		812		9,764
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221

	At June 30, 2018
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonacquired Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	687,208		87,692		892,865		319,206		15,760		341,870		2,344,601
Special Mention		—		—		4,980		74		103		3,945		9,102
Substandard		2,726		163		3,527		1,622		100		862		9,000
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
Performing	$	687,025		87,624		898,662		319,241		15,844		345,865		2,354,261
Nonperforming:
90 days past due still accruing		—		—		—		—		19		—		19
Nonaccrual		2,909		231		2,710		1,661		100		812		8,423
Total nonperforming		2,909		231		2,710		1,661		119		812		8,442
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	7,614		62		22,796		2,074		78		6,284		38,908
Special Mention		877		7		12,625		3,206		—		1,025		17,740
Substandard		1,010		22		3,765		1,596		—		1,477		7,870
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518
Performing	$	9,086		86		39,186		5,974		78		8,786		63,196
Nonperforming:
90 days past due still accruing		415		5		—		902		—		—		1,322
Nonaccrual		—		—		—		—		—		—		—
Total nonperforming		415		—		—		—		—		—		1,322
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
Total Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	658,031		89,919		898,328		287,491		19,817		296,038		2,249,624
Special Mention		4,086		30		28,670		4,201		35		12,339		49,361
Substandard		3,657		192		6,822		3,101		138		6,633		20,543
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
Performing	$	663,161		90,024		932,280		293,557		19,968		314,697		2,313,687
Nonperforming:
90 days past due still accruing		686		9		—		1,185		—		—		1,880
Nonaccrual		1,927		108		1,540		51		22		313		3,961
Total nonperforming		2,613		117		1,540		1,236		22		313		5,841
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
	At December 31, 2017
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonpurchased Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	652,508		89,853		887,458		286,857		19,785		295,470		2,231,931
Special Mention		—		—		2,526		79		—		2,067		4,672
Substandard		2,089		108		1,485		501		110		217		4,510
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113
Performing	$	652,670		89,853		889,929		287,386		19,873		297,441		2,237,152
Nonperforming:
90 days past due still accruing		—		—		—		—		—		—		—
Nonaccrual		1,927		108		1,540		51		22		313		3,961
Total nonperforming		1,927		108		1,540		51		22		313		3,961
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	5,523		66		10,870		634		32		568		17,693
Special Mention		4,086		30		26,144		4,122		35		10,272		44,689
Substandard		1,568		84		5,337		2,600		28		6,416		16,033
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415
Performing	$	10,491		171		42,351		6,171		95		17,256		76,535
Nonperforming:
90 days past due still accruing		686		9		—		1,185		—		—		1,880
Nonaccrual		—		—		—		—		—		—		—
Total nonperforming		686		9		—		1,185		—		—		1,880
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415

The Company is party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets.

Troubled Debt Restructurings 

At June 30, 2018, there were $6.3 million in loans designated as troubled debt restructurings of which $5.0 million were accruing. At June 30, 2017, there were $6.7 million in loans designated as troubled debt restructurings of which $5.5 million were accruing. At December 31, 2017, there were $6.5 million in loans designated as troubled debt restructurings of which $5.3 million were accruing. 

There was one loan with a premodification and post modification balance of $135,000 identified as a troubled debt restructuring during the six months ended June 30, 2018 due to an interest rate change. There were two loans with a premodification and post modification balance of $608,000 identified as troubled debt restructurings during the six months ended June 30, 2017 due to interest rate changes.

No loans previously restructured in the twelve months prior to June 30, 2018 and 2017 went into default during the three and six months ended June 30, 2018 and 2017. 

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REAL ESTATE ACQUIRED THROUGH FORECLOSURE

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

REAL ESTATE ACQUIRED THROUGH FORECLOSURE

NOTE 6 – REAL ESTATE ACQUIRED THROUGH FORECLOSURE

The following presents summarized activity in real estate acquired through foreclosure for the periods ended June 30, 2018 and December 31, 2017:

	At June 30,			At December 31,
	2018			2017
	(In thousands)
Balance at beginning of period	$	3,106			1,179
Additions		91			2,554
Sales		(1,345	)		(627	)
Write downs		(126	)		—
Balance at end of period	$	1,726			3,106

A summary of the composition of real estate acquired through foreclosure follows:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Real estate loans:
One-to-four family	$	433		709
Construction and development		1,293		2,397
	$	1,726	$	3,106

XML

DEPOSITS

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

DEPOSITS

NOTE 7 - DEPOSITS

Deposits outstanding by type of account at June 30, 2018 and December 31, 2017 are summarized as follows:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing demand accounts	$	577,568		525,615
Interest-bearing demand accounts		584,719		551,308
Savings accounts		198,571		213,142
Money market accounts		458,558		452,734
Certificates of deposit:
Less than $250,000		788,693		755,887
$250,000 or more		100,689		106,243
Total certificates of deposit		889,382		862,130
Total deposits	$	2,708,798		2,604,929

The aggregate amount of brokered certificates of deposit was $110.5 million and $99.2 million at June 30, 2018 and December 31, 2017, respectively. Brokered certificates of deposit are included in the table above under certificates of deposit less than $250,000. The aggregate amount of institutional certificates of deposit was $57.1 million and $39.1 million at June 30, 2018 and December 31, 2017, respectively. 

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 8 – ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS

Current accounting literature requires disclosures about the fair value of all financial instruments whether or not recognized in the balance sheet, for which it is practicable to estimate the value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized through immediate settlement of the instrument.

The fair value of a financial instrument is an amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced sale. Fair values are estimated at a specific point in time based on relevant market information and information about the financial instruments. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. 

The Company has used management’s best estimate of fair value based on the above assumptions. Thus the fair values presented may not be the amounts that could be realized in an immediate sale or settlement of the instrument. In addition, any income taxes or other expenses that would be incurred in an actual sale or settlement are not taken into consideration in the fair values presented. 

The Company determines the fair value of its financial instruments based on the fair value hierarchy established under ASC 820-10, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the financial instrument’s fair value measurement in its entirety. There are three levels of inputs that may be used to measure fair value. The three levels of inputs of the valuation hierarchy are defined below: 

Level 1 Quoted prices (unadjusted) in active markets for identical assets and liabilities for the instrument or security to be valued. Level 1 assets include marketable equity securities as well as U.S. Treasury securities that are highly liquid and are actively traded in over-the-counter markets.

Level 2 Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or model-based valuation techniques for which all significant assumptions are derived principally from or corroborated by observable market data. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined by using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. U.S. Government sponsored agency securities, mortgage-backed securities issued by U.S. Government sponsored enterprises and agencies, obligations of states and municipalities, collateralized mortgage obligations issued by U.S. Government sponsored enterprises, and mortgage loans held-for-sale are generally included in this category. Certain private equity investments that invest in publicly traded companies are also considered Level 2 assets.

Level 3 Unobservable inputs that are supported by little, if any, market activity for the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow models and similar techniques, and may also include the use of market prices of assets or liabilities that are not directly comparable to the subject asset or liability. These methods of valuation may result in a significant portion of the fair value being derived from unobservable assumptions that reflect The Company’s own estimates for assumptions that market participants would use in pricing the asset or liability. This category primarily includes collateral-dependent impaired loans, other real estate, certain equity investments, and certain private equity investments. The following is a description of the fair value methodologies used for financial assets and liabilities.

Assets and liabilities measured at fair value on a recurring basis are as follows as of June 30, 2018 and December 31, 2017:

	Quoted market		Significant other		Significant other
	price in active		observable inputs		unobservable inputs
	markets (Level 1)		(Level 2)		(Level 3)
	(In thousands)
June 30, 2018
Available-for-sale investment securities:
Municipal securities	$	—		201,577		—
US government agencies		—		12,945		—
Collateralized loan obligations		—		172,508		—
Corporate securities		—		6,989		—
Mortgage-backed securities:
Agency		—		233,757		—
Non-agency		—		165,884		—
Trust Preferred Securities		—		—		11,308
Loans held for sale		—		39,473		—
Derivative assets:
Cash flow hedges:
Interest rate swaps		2,007		—		—
Non-hedging derivatives:
Interest rate swaps		2,007		—		—
Mortgage loan interest rate lock commitments		—		1,476		—
Mortgage loan forward sales commitments		—		511		—
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		—		—		—
Mortgage-backed securities forward sales commitments		—		129		—
Total	$	4,014		835,249		11,308
December 31, 2017
Available-for-sale investment securities:
Municipal securities	$	—		247,350		—
US government agencies		—		12,008		—
Collateralized loan obligations		—		128,643		—
Corporate securities		—		7,006		—
Mortgage-backed securities:
Agency		—		243,595		—
Non-agency		—		95,125		—
Trust preferred securities		—		—		9,512
Loans held for sale		—		35,292		—
Derivative assets:
Cash flow hedges:
Interest rate swaps		644		—		—
Non-hedging derivatives:
Interest rate swaps		964		—		—
Mortgage loan interest rate lock commitments		—		890		—
Mortgage loan forward sales commitments		—		305		—
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		95		—		—
Mortgage-backed securities forward sales commitments		—		61		—
Total	$	1,703		770,275		9,512

Securities Available-for-Sale 

Fair values for investment securities available-for-sale are measured on a recurring basis upon quoted market prices, if available. If quoted market prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for prepayment assumptions, projected credit losses, and liquidity. At June 30, 2018 and December 31, 2017, the Company’s investment securities available-for-sale are recurring Level 2 except for trust preferred securities which are determined to be Level 3. 

Mortgage Loans Held for Sale

Mortgage loans held for sale are recorded at either fair value, if elected, or the lower of cost or fair value on an individual loan basis on a recurring basis. Origination fees and costs for loans held for sale recorded at lower of cost or market are capitalized in the basis of the loan and are included in the calculation of realized gains and losses upon sale. Origination fees and costs are recognized in earnings at the time of origination for loans held for sale that are recorded at fair value. Fair value is derived from observable current market prices, when available, and includes loan servicing value. When observable market prices are not available, the Company uses judgment and estimates fair value using internal models, in which the Company uses its best estimates of assumptions it believes would be used by market participants in estimating fair value. Mortgage loans held for sale are classified within Level 2 of the valuation hierarchy.

Derivative Assets and Liabilities 

Fair values for derivative assets and liabilities are measured on a recurring basis. The primary use of derivative instruments is related to the mortgage banking activities of the Company. The Company’s wholesale mortgage banking subsidiary enters into interest rate lock commitments related to expected funding of residential mortgage loans at specified times in the future. Interest rate lock commitments that relate to the origination of mortgage loans that will be held-for-sale are considered derivative instruments under applicable accounting guidance. As such, the Company records its interest rate lock commitments and forward loan sales commitments at fair value, determined as the amount that would be required to settle each of these derivative financial instruments at the balance sheet date. In the normal course of business, the mortgage subsidiary enters into contractual interest rate lock commitments to extend credit, if approved, at a fixed interest rate and with fixed expiration dates. The commitments become effective when the borrowers “lock-in” a specified interest rate within the time frames established by the mortgage banking subsidiary. Market risk arises if interest rates move adversely between the time of the interest rate lock by the borrower and the sale date of the loan to an investor. To mitigate the effect of the interest rate risk inherent in providing interest rate lock commitments to borrowers, the mortgage banking subsidiary enters into best efforts forward sales contracts with third party investors. The forward sales contracts lock in a price for the sale of loans similar to the specific interest rate lock commitments. Both the interest rate lock commitments to the borrowers and the forward sales contracts to the investors that extend through to the date the loan may close are derivatives, and accordingly, are marked to fair value through earnings. In estimating the fair value of an interest rate lock commitment, the Company assigns a probability to the interest rate lock commitment based on an expectation that it will be exercised and the loan will be funded. The fair value of the interest rate lock commitment is derived from the fair value of related mortgage loans, which is based on observable market data and includes the expected net future cash flows related to servicing of the loans. The fair value of the interest rate lock commitment is also derived from inputs that include guarantee fees negotiated with the agencies and private investors, buy-up and buy-down values provided by the agencies and private investors, and interest rate spreads for the difference between retail and wholesale mortgage rates. The Company also applies fall-out ratio assumptions for those interest rate lock commitments for which we do not close a mortgage loan. The fall-out ratio assumptions are based on the mortgage subsidiary’s historical experience, conversion ratios for similar loan commitments, and market conditions. While fall-out tendencies are not exact predictions of which loans will or will not close, historical performance review of loan-level data provides the basis for determining the appropriate hedge ratios. In addition, on a periodic basis, the mortgage banking subsidiary performs analysis of actual rate lock fall-out experience to determine the sensitivity of the mortgage pipeline to interest rate changes from the date of the commitment through loan origination, and then period end, using applicable published mortgage-backed investment security prices. The expected fall-out ratios (or conversely the “pull-through” percentages) are applied to the determined fair value of the unclosed mortgage pipeline in accordance with GAAP. Changes to the fair value of interest rate lock commitments are recognized based on interest rate changes, changes in the probability that the commitment will be exercised, and the passage of time. The fair value of the forward sales contracts to investors considers the market price movement of the same type of security between the trade date and the balance sheet date. These instruments are defined as Level 2 within the valuation hierarchy.

Derivative instruments not related to mortgage banking activities include interest rate swap agreements. Fair values for these instruments are based on quoted market prices, when available. As such, the fair value adjustments for derivatives with fair values based on quoted market prices in an active market are recurring Level 1.

Assets measured at fair value on a nonrecurring basis are as follows as of June 30, 2018 and December 31, 2017:

	Quoted market price		Significant other		Significant other
	in active markets		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)
	(In thousands)
June 30, 2018
Impaired loans:
Loans secured by real estate:
One-to-four family	$	—		—		3,494
Home equity		—		—		97
Commercial real estate		—		—		4,494
Construction and development		—		—		1,306
Consumer loans		—		—		19
Commercial business loans		—		—		743
Real estate owned:
One-to-four family		—		—		433
Construction and development		—		—		1,293
Mortgage servicing rights		—		—		29,890
Total	$	—		—		41,769
December 31, 2017
Impaired loans:
Loans secured by real estate:
One-to-four family	$	—		—		3,371
Home equity		—		—		79
Commercial real estate		—		—		4,811
Construction and development		—		—		318
Consumer loans		—		—		26
Commercial business loans		—		—		269
Real estate owned:
One-to-four family		—		—		709
Construction and development		—		—		2,397
Mortgage servicing rights		—		—		26,255
Total	$	—		—		38,235

For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2018 and December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

	June 30, 2018 and December 31, 2017
		Significant	Significant Unobservable
	Valuation Technique	Observable Inputs	Inputs
Impaired Loans	Appraisal Value	Appraisals and or sales of comparable properties	Appraisals discounted 10% to 20% for sales commissions and other holding costs
Real Estate Owned	Appraisal Value/ Comparison Sales	Appraisals and or sales of comparable properties	Appraisals discounted 10% to 20% for sales commissions and other holding costs
Mortgage Servicing Rights	Discounted cash flows	Comparable sales	Discount rates averaging 11.5% - 13% in each period presented Prepayment rates averaging 6% - 8.5% in 2018 Prepayment rates averaging 8% - 10% in 2017

Impaired Loans

Loans that are considered impaired are recorded at fair value on a nonrecurring basis. Once a loan is considered impaired, the fair value is measured using one of several methods, including collateral liquidation value, market value of similar debt and discounted cash flows. Those impaired loans not requiring a specific charge against the allowance represent loans for which the fair value of the expected repayments or collateral meet or exceed the recorded investment in the loan. Loans which are deemed to be impaired are primarily valued on a nonrecurring basis at the fair value of the underlying real estate collateral. Such fair values are obtained using independent appraisals, which the Company considers to be Level 3 inputs.

Other Real Estate Owned (“OREO”)

OREO is carried at the lower of carrying value or fair value on a nonrecurring basis.  Fair value is based upon independent appraisals or management’s estimation of the collateral and is considered a Level 3 measurement.  When the OREO value is based upon a current appraisal or when a current appraisal is not available or there is estimated further impairment, the measurement is considered a Level 3 measurement.

Mortgage Servicing Rights

A mortgage servicing right asset represents the amount by which the present value of the estimated future net cash flows to be received from servicing loans are expected to more than adequately compensate the Company for performing the servicing. The Company initially measures servicing assets and liabilities retained related to the sale of residential loans held for sale (“mortgage servicing rights”) at fair value, if practicable. For subsequent measurement purposes, the Company measures servicing assets and liabilities based on the lower of cost or market on a quarterly basis on a nonrecurring basis. The quarterly determination of fair value of servicing rights is provided by a third party and is estimated using a present value cash flow model. The most important assumptions used in the valuation model are the anticipated rate of the loan prepayments and discount rates. Although some assumptions in determining fair value are based on standards used by market participants, some are based on unobservable inputs and therefore are classified in Level 3 of the valuation hierarchy.

The carrying amount and estimated fair value of the Company’s financial instruments at June 30, 2018 and December 31, 2017 are as follows:

	At June 30, 2018
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Financial assets:	(In thousands)
Cash and due from banks	$	27,327		27,327		27,327		—		—
Interest-bearing cash		54,751		54,751		54,751		—		—
Securities available-for-sale		804,968		804,968		—		793,660		11,308
Federal Home Loan Bank stock		19,019		19,019		—		—		19,019
Other investments		3,429		3,429		—		—		3,429
Derivative assets		6,001		6,001		4,014		1,987		—
Loans held for sale		39,473		39,473		—		39,473		—
Loans receivable, net		2,414,234		2,422,163		—		—		2,422,163
Accrued interest receivable		12,664		12,664		—		12,664		—
Real estate acquired through foreclosure		1,726		1,726		—		—		1,726
Mortgage servicing rights		23,626		29,890		—		—		29,890
Financial liabilities:
Deposits		2,708,798		2,712,165		—		2,712,165		—
Short-term borrowed funds		354,500		354,595		—		354,595		—
Long-term debt		46,347		46,002		—		46,002		—
Derivative liabilities		129		129		—		129		—
Drafts outstanding		10,454		10,454		—		10,454		—
Advances from borrowers for insurance and taxes		4,558		4,558		—		4,558		—
Accrued interest payable		1,560		1,560		—		1,560		—
Dividends payable to stockholders		1,354		1,354		—		1,354		—

	At December 31, 2017
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Financial assets:	(In thousands)
Cash and due from banks	$	25,254		25,254		25,254		—		—
Interest-bearing cash		55,998		55,998		55,998		—		—
Securities available-for-sale		743,239		743,239		—		733,727		9,512
Federal Home Loan Bank stock		19,065		19,065		—		—		19,065
Other investments		3,446		3,446		—		—		3,446
Derivative assets		2,803		2,803		1,608		1,195		—
Loans held for sale		35,292		35,292		—		35,292		—
Loans receivable, net		2,308,050		2,311,088		—		—		2,311,088
Accrued interest receivable		11,992		11,992				11,992
Real estate acquired through foreclosure		3,106		3,106		—		—		3,106
Mortgage servicing rights		21,003		26,255		—		—		26,255
Financial liabilities:
Deposits		2,604,929		2,597,526		—		2,597,526		—
Short-term borrowed funds		340,500		339,870		—		339,870		—
Long-term debt		72,259		71,859		—		71,859		—
Derivative liabilities		156		156		95		61		—
Drafts outstanding		7,324		7,324		—		7,324		—
Advances from borrowers for insurance and taxes		3,005		3,005		—		3,005		—
Accrued interest payable		1,126		1,126		—		1,126		—
Dividends payable to stockholders		1,051		1,051		—		1,051		—

	At June 30, 2018				At December 31, 2017
	Notional		Estimated		Notional		Estimated
	Amount		Fair Value		Amount		Fair Value
Off-Balance Sheet Financial Instruments:	(In thousands)
Commitments to extend credit	$	378,608		—		422,065		—
Standby letters of credit		14,329		—		4,449		—

In determining appropriate levels, the Company performs a detailed analysis of the assets and liabilities that are subject to fair value disclosures. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3.

Cash and due from banks

The carrying amounts of these financial instruments approximate fair value. All mature within 90 days and present no anticipated credit concerns.

Interest-bearing cash

The carrying amount of these financial instruments approximates fair value. 

FHLB stock and other investments

The carrying amount of these financial instruments approximates fair value.

Loans receivable

During the first quarter of 2018, the Company adopted ASU No. 2016-01, “Recognition and Measurement of Financial Assets and Liabilities.” The amendments included within this standard, which are applied prospectively, require the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using an exit price notion. Prior to adopting the amendments included in the standard, the Company was allowed to measure fair value under an entry price notion. The entry price notion previously applied by the Company used a discounted cash flows technique to calculate the present value of expected future cash flows for a financial instrument. The exit price notion uses the same approach, but also incorporates other factors, such as enhanced credit risk, illiquidity risk and market factors that sometimes exist in exit prices in dislocated markets.

As of June 30, 2018, the technique used by the Company to estimate the exit price of the loan portfolio consists of similar procedures to those used as of December 31, 2017, but with added emphasis on both illiquidity risk and credit risk not captured by the previously applied entry price notion. The fair value of the Company’s loan portfolio has always included a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk as described above. However, under the new guidance, the Company believes a further credit risk discount must be applied through the use of a discounted cash flow model to compensate for illiquidity risk, based on certain assumptions included within the discounted cash flow model, primarily the use of discount rates that better capture inherent credit risk over the lifetime of a loan. This consideration of enhanced credit risk provides an estimated exit price for the Company’s loan portfolio.

For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral.

As of December 31, 2017, the fair value of the Company’s loan portfolio includes a credit risk assumption in the determination of the fair value of its loans. This credit risk assumption is intended to approximate the fair value that a market participant would realize in a hypothetical orderly transaction. The Company’s loan portfolio is initially fair valued using a segmented approach. The Company divides its loan portfolio into the following categories: variable rate loans, impaired loans and all other loans. The results are then adjusted to account for credit risk. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values approximate carrying values. Fair values for impaired loans are estimated using discounted cash flow models or based on the fair value of the underlying collateral. For other loans, fair values are estimated using discounted cash flow models, using current market interest rates offered for loans with similar terms to borrowers of similar credit quality. The values derived from the discounted cash flow approach for each of the above portfolios are then further discounted to incorporate credit risk. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price as of December 31, 2017. Loans receivable are classified within Level 3 of the valuation hierarchy. 

Accrued interest receivable

The carrying value approximates the fair value. 

Deposits

The estimated fair value of demand deposits, savings accounts, and money market accounts is the amount payable on demand at the reporting date. The estimated fair value of fixed maturity certificates of deposits is estimated by discounting the future cash flows using rates currently offered for deposits of similar remaining maturities. 

Short-term borrowed funds

The carrying amounts of federal funds purchased, borrowings under repurchase agreements, and other short-term borrowings maturing within 90 days approximate their fair values. Estimated fair values of other short-term borrowings are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. 

Long-term debt

The estimated fair values of the Company’s long-term debt are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. 

Drafts outstanding, advances from borrowers for insurance and taxes and dividends payable to stockholders

The carrying value approximates the fair value.

Accrued interest payable

The fair value approximates the carrying value.

Commitments to extend credit

The carrying amounts of these commitments are considered to be a reasonable estimate of fair value because the commitments underlying interest rates are generally based upon current market rates.

Off-balance sheet financial instruments

Contract values and fair values for off-balance sheet, credit-related financial instruments are based on estimated fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and counterparties’ credit standing.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2018

Earnings Per Share

EARNINGS PER SHARE

NOTE 9 - EARNINGS PER SHARE

Basic earnings per share (“EPS”) represents income available to common stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects additional shares that would have been outstanding if dilutive potential shares had been issued. Potential shares that may be issued by the Company relate solely to outstanding stock options, restricted stock (non-vested shares), restricted stock units (“RSUs”) and warrants, and are determined using the treasury stock method. Under the treasury stock method, the number of incremental shares is determined by assuming the issuance of stock for the outstanding stock options, unvested restricted stock and RSUs, and warrants, reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price for the period of the Company’s stock.

The following is a summary of the reconciliation of weighted average shares outstanding for the three and six months ended June 30, 2018 and 2017:

	For the Three Months Ended June 30,
	2018				2017
	Basic		Diluted		Basic		Diluted
Weighted average shares outstanding		21,243,094		21,243,094		16,029,332		16,029,332
Effect of dilutive securities		—		210,945		—		150,839
Weighted average shares outstanding		21,243,094		21,454,039		16,029,332		16,180,171
	For the Six Months Ended June 30,
	2018				2017
	Basic		Diluted		Basic		Diluted
Weighted average shares outstanding		20,961,182		20,961,182		14,980,349		14,980,349
Effect of dilutive securities		—		213,754		—		164,447
Weighted average shares outstanding		20,961,182		21,174,936		14,980,349		15,144,796

The following is a summary of the reconciliation of shares issued and outstanding and unvested restricted stock awards as of June 30, 2018 and 2017 used to calculate book value per share:

	As of June 30,
	2018			2017
Issued and outstanding shares		22,570,182			16,156,943
Less nonvested restricted stock awards		(137,345	)		(101,489	)
Period end dilutive shares		22,432,837			16,055,454

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SUPPLEMENTAL SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

SUPPLEMENTAL SEGMENT INFORMATION

NOTE 10 – SUPPLEMENTAL SEGMENT INFORMATION

The Company has three reportable segments: community banking, wholesale mortgage banking (“mortgage banking”) and other. The community banking segment includes traditional banking services offered through the Bank as well as the managerial and operational support provided by Carolina Services. The mortgage banking segment provides wholesale mortgage loan origination and servicing offered through Crescent Mortgage Company. The other segment includes parent company financial information and represents an overhead function rather than an operating segment. The parent company’s most significant assets are its net investments in its subsidiaries.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1. The Company evaluates performance based on net income.

The Company accounts for intersegment revenues and expenses as if the revenue/expense transactions were generated to third parties, that is, at current market prices.

The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each segment has different types and levels of credit and interest rate risk.

The following tables present selected financial information for the Company’s reportable business segments for the three and six months ended June 30, 2018 and 2017:

	Community		Mortgage
For the Three Months Ended June 30, 2018	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	39,060		458		14			(55	)		39,477
Interest expense		6,066		77		506			(77	)		6,572
Net interest income (expense)		32,994		381		(492	)		22			32,905
Provision for loan losses		534		25		—			—			559
Noninterest income from external customers		5,570		5,434		23			—			11,027
Intersegment noninterest income		242		9		—			(251	)		—
Noninterest expense		19,348		4,748		275			—			24,371
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		18,924		811		(746	)		13			19,002
Income tax expense (benefit)		3,996		213		(178	)		5			4,036
Net income (loss)	$	14,928		598		(568	)		8			14,966
	Community		Mortgage
For the Three Months Ended June 30, 2017	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	21,691		427		8			(3	)		22,123
Interest expense		2,747		42		278			(42	)		3,025
Net interest income (expense)		18,944		385		(270	)		39			19,098
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		3,494		5,311		—			—			8,805
Intersegment noninterest income		242		31		—			(273	)		—
Noninterest expense		11,448		4,164		278			—			15,890
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		11,232		1,323		(550	)		8			12,013
Income tax expense (benefit)		2,789		85		(204	)		3			2,673
Net income (loss)	$	8,443		1,238		(346	)		5			9,340

	Community		Mortgage
For the Six Months Ended June 30, 2018	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	76,317		889		27			(79	)		77,154
Interest expense		11,150		130		968			(130	)		12,118
Net interest income (expense)		65,167		759		(941	)		51			65,036
Provision for loan losses		534		25		—			—			559
Noninterest income from external customers		10,630		10,358		88			—			21,076
Intersegment noninterest income		483		26		—			(509	)		—
Noninterest expense		52,278		9,137		554			1			61,970
Intersegment noninterest expense		—		480		3			(483	)		—
Income (loss) before income taxes		23,468		1,501		(1,410	)		24			23,583
Income tax expense (benefit)		4,556		341		(345	)		9			4,561
Net income (loss)	$	18,912		1,160		(1,065	)		15			19,022
	Community		Mortgage
For the Six Months June 30, 2017	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	38,949		822		13			8			39,792
Interest expense		4,965		54		459			(54	)		5,424
Net interest income (expense)		33,984		768		(446	)		62			34,368
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		5,912		10,123		—			—			16,035
Intersegment noninterest income		483		64		—			(547	)		—
Noninterest expense		22,772		8,216		488			—			31,476
Intersegment noninterest expense		—		480		3			(483	)		—
Income (loss) before income taxes		17,607		2,259		(937	)		(2	)		18,927
Income tax expense (benefit)		4,656		375		(346	)		(1	)		4,684
Net income (loss)	$	12,951		1,884		(591	)		(1	)		14,243

The following tables present selected financial information for the Company’s reportable business segments for June 30, 2018 and December 31, 2017: 

	Community		Mortgage
At June 30, 2018	Banking		Banking		Other		Eliminations			Total
					(In thousands)
Assets	$	3,690,507		83,258		584,455		(665,129	)		3,693,091
Loans receivable, net		2,397,896		31,385		—		(15,047	)		2,414,234
Loans held for sale		15,990		23,483		—		—			39,473
Deposits		2,718,920		—		—		(10,122	)		2,708,798
Borrowed funds		368,500		14,600		32,347		(14,600	)		400,847
	Community		Mortgage
At December 31, 2017	Banking		Banking		Other		Eliminations			Total
					(In thousands)
Assets	$	3,516,551		81,681		503,144		(582,359	)		3,519,017
Loans receivable, net		2,295,316		28,206		—		(15,472	)		2,308,050
Loans held for sale		5,999		29,293		—		—			35,292
Deposits		2,611,106		—		—		(6,177	)		2,604,929
Borrowed funds		380,500		15,000		32,259		(15,000	)		412,759

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Organization

Organization

Carolina Financial Corporation (“Carolina Financial” or the “Company”), incorporated under the laws of the State of Delaware, is a financial holding company with one wholly owned subsidiary, CresCom Bank (the “Bank”). CresCom Bank operates five wholly-owned subsidiaries, Crescent Mortgage Company, Carolina Services Corporation of Charleston (“Carolina Services”), DTFS, Inc., CresCom Insurance, LLC and CresCom Leasing, LLC. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, the Bank. In consolidation, all material intercompany accounts and transactions have been eliminated. The results of operations of the businesses acquired in transactions accounted for as purchases are included only from the dates of acquisition. All majority-owned subsidiaries are consolidated unless control is temporary or does not rest with the Company.

At June 30, 2018, statutory business trusts (“Trusts”) created or acquired by the Company had outstanding trust preferred securities with an aggregate par value of $36.0 million. The principal assets of the Trusts are $37.1 million of the Company’s subordinated debentures with identical rates of interest and maturities as the trust preferred securities. The Trusts have issued $1.1 million of common securities to the Company and are included in other investments in the accompanying consolidated balance sheets. The Trusts are not consolidated subsidiaries of the Company.

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2018. There have been no significant changes to the accounting policies as disclosed in the Company’s Form 10-K.

Management's Estimates

Management’s Estimates

The financial statements are prepared in accordance with GAAP, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, including valuation for impaired loans, the valuation of real estate acquired in connection with foreclosure or in satisfaction of loans, the valuation of securities, the valuation of derivative instruments, the valuation of assets acquired and liabilities assumed in business combinations, the valuation of mortgage servicing rights, the determination of the reserve for mortgage loan repurchase losses, asserted and unasserted legal claims and deferred tax assets or liabilities. In connection with the determination of the allowance for loan losses and foreclosed real estate, management obtains independent appraisals for significant properties. Management must also make estimates in determining the estimated useful lives and methods for depreciating premises and equipment.

Management uses available information to recognize losses on loans and foreclosed real estate. However, future additions to the allowance may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank’s allowance for loan losses and foreclosed real estate. It is possible that the allowance for loan losses and valuation of foreclosed real estate may change materially in the near term.

Earnings Per Share

Earnings Per Share

Basic earnings per share (“EPS”) represents income available to common stockholders divided by the weighted-average number of shares outstanding during the period. Diluted earnings per share reflects additional shares that would have been outstanding if dilutive potential shares had been issued. Potential shares that may be issued by the Company relate solely to outstanding stock options, restricted stock (non-vested shares), restricted stock units (“RSUs”) and warrants, and are determined using the treasury stock method. Under the treasury stock method, the number of incremental shares is determined by assuming the issuance of stock for the outstanding stock options, unvested restricted stock and RSUs, and warrants, reduced by the number of shares assumed to be repurchased from the issuance proceeds, using the average market price for the period of the Company’s stock.

Subsequent Events

Subsequent Events

Subsequent events are material events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Non-recognized subsequent events are events that provide evidence about conditions that did not exist at the date of the statement of financial condition but arose after that date. Management has reviewed events occurring through the date the financial statements were issued and no subsequent events were identified that required accrual or disclosure .

Reclassification

Reclassification

Certain reclassifications of accounts reported for previous periods have been made in these consolidated financial statements. Such reclassifications had no effect on stockholders’ equity or the net income as previously reported.

Recently Issued Accounting Pronouncements

Recently Adopted Accounting Pronouncements

During the first quarter of 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2016-01, Recognition and Measurement of Financial Assets and Liabilities. The amendments included within this standard, which are applied prospectively, require the Company to disclose fair value of financial instruments measured at amortized cost on the balance sheet to measure that fair value using an exit price notion. Prior to adopting the amendments included in the standard, the Company was allowed to measure fair value under an entry price notion. Refer to Note 8 -Estimated Fair Value of Financial Instruments for more information.

In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”). ASU 2016-08 updates the new revenue standard by clarifying the principal versus agent implementation guidance, but does not change the core principle of the new standard. The updates to the principal versus agent guidance: (i) require an entity to determine whether it is a principal or an agent for each distinct good or service (or a distinct bundle of goods or services) to be provided to the customer; (ii) illustrate how an entity that is a principal might apply the control principle to goods, services, or rights to services, when another party is involved in providing goods or services to a customer and (iii) clarify that the purpose of certain specific control indicators is to support or assist in the assessment of whether an entity controls a good or service before it is transferred to the customer, provide more specific guidance on how the indicators should be considered, and clarify that their relevance will vary depending on the facts and circumstances. The Company’s revenue is primarily comprised of net interest income on financial assets and financial liabilities, which is explicitly excluded from the scope of ASU 2014-09, and non-interest income. The Company has evaluated ASU 2016-08 and 2014-09 and determined that this guidance did not have a material impact on the way the Company currently recognizes revenue or the way it recognizes expenses related to those revenue streams. The Company adopted ASU No. 2014-09 and its related amendments on its required effective date of January 1, 2018 utilizing the modified retrospective approach. Since there was no net income impact upon adoption of the new guidance, a cumulative effect adjustment to opening retained earnings was not deemed necessary. Consistent with the modified retrospective approach, the Company did not adjust prior period amounts.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718) (“ASU 2017-09”). ASU 2017-09 provides clarity when applying guidance to a change to the terms or conditions of a share-based payment award. The amendments are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company adopted ASU No. 2017-09 and its related amendments on its required effective date of January 1, 2018. The amendments will be applied prospectively to an award modified on or after the adoption date. The Company has determined that this guidance did not have a material impact on the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities (“ASU 2017-12”). ASU 2017-12 amends the requirements of the Derivatives and Hedging Topic of the Accounting Standards Codification (“ASC”) to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements.

In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Cost (Subtopic 310-20):  Premium Amortization on Purchased Callable Debt Securities (“ASU 2017-08”).  ASU 2017-08 shortens the amortization period of the premium for certain callable debt securities, from the contractual maturity date to the earliest call date. The amendments do not require an accounting change for securities held at a discount; an entity will continue to amortize to the contractual maturity date the discount related to callable debt securities. The amendments apply to the amortization of premiums on callable debt securities with explicit, non-contingent call features that are callable at fixed prices on preset dates.  For public business entities, ASU 2017-08 is effective in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities, including in an interim period. The amendments should be applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the amendments are adopted.  The Company has determined that this guidance will not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”).  ASU 2016-02 applies a right-of-use (“ROU”) model that requires a lessee to record, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset and a liability to make lease payments. For leases with a term of 12 months or less, a practical expedient is available whereby a lessee may elect, by class of underlying asset, not to recognize an ROU asset or lease liability. At inception, lessees must classify all leases as either finance or operating based on five criteria. Balance sheet recognition of finance and operating leases is similar, but the pattern of expense recognition in the income statement, as well as the effect on the statement of cash flows, differs depending on the lease classification.  For public business entities, the amendments in ASU 2016-02 are effective for interim and annual periods beginning after December 15, 2018.   In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach which includes a number of optional practical expedients that entities may elect to apply.   The Company is currently evaluating the provisions of ASU 2016-02 in relation to its outstanding leases to determine the potential impact the new standard will have to the Company’s financial statements. The Company expects the new guidance will require these lease arrangements to be recognized on the consolidated statements of condition as a right-of-use asset and a corresponding lease liability. Therefore, the Company’s preliminary evaluation indicates the provisions of ASU No. 2016-02 are expected to impact the Company’s consolidated statements of condition, as well as our regulatory capital ratios. However, the Company continues to evaluate the extent of potential impact the new guidance will have on the Company’s consolidated financial statements. The Company is nearing completion of identifying a complete inventory of arrangements containing a lease and accumulating the lease data necessary to apply the amended guidance. In addition, the Company has obtained new software to aid in the transition to the new leasing guidance.

In January 2017, the FASB issued ASU No. 2017-04, Intangible-Goodwill and other (Topic 350):  Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in today’s two-step impairment test under Accounting Standards Codification ASC 350 and eliminating Step 2 from the goodwill impairment test.  As amended, the goodwill impairment test will consist of one step comparing the fair value of a reporting unit with its carrying amount.  An entity should recognize a goodwill impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value.  The guidance is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those years. The amendments should be adopted prospectively and early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  The Company has determined that this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326):  Measurement of Credit Losses on Financial Instruments  (“ASU 2016-13”).  ASU 2016-13 requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.  The CECL model is expected to result in earlier recognition of credit losses.  ASU 2016-13 also requires new disclosures for financial assets measured at amortized cost, loans and available-for-sale debt securities.  The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted.  Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted.   The Company is continuing to assess the impact that this new guidance will have on its consolidated financial statements through its implementation team. The team has assigned roles and responsibilities, key tasks to complete, and a general timeline to be followed. The implementation team meets periodically to discuss the latest developments and ensure progress is being made. The team also keeps current on evolving interpretations and industry practices related to ASU 2016-13 via webcasts, publications, and conferences. The Company has engaged an outside consultant to assist with the methodology review and validation, as well as other key aspects of implementing the standard. The Company’s preliminary evaluation indicates the provisions of ASU No. 2016-13 are expected to impact the Company’s consolidated financial statements, in particular the level of the reserve for credit losses. However, the Company continues to evaluate the extent of the potential impact.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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BUSINESS COMBINATION (Tables)

6 Months Ended

Jun. 30, 2018

First South Bancorp, Inc. [Member]

Schedule of Assets and Liabilities Acquired [Table Text Block]

The following table presents a summary of total consideration paid by the Company at the acquisition date (dollars in thousand).

Common stock issued (4,822,540 shares at $36.85 per share)	$	177,711
Cash in lieu of fractional shares and fair value of stock options		983
Total consideration paid	$	178,694

Schedule of loans acquired at the Acquisition date

The following table summarizes the consideration paid by the Company in the merger with First South and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

	As Reported by			Fair Value			As Recorded by
November 1, 2017	First South			Adjustments			the Company
Assets	(In thousands)
Cash and cash equivalents	$	66,109						66,109
Securities available-for-sale		186,038						186,038
Federal Home Loan Bank stock		1,593						1,593
Loans held for sale		1,282						1,282
Loans receivable		783,779			(24,620	)(a)		759,159
Allowance for loan losses		(9,495	)		9,495	(b)		—
Premises and equipment		10,761			1,500	(c)		12,261
Foreclosed assets		1,922			(556	)(d)		1,366
Core deposit intangible		1,410			11,090	(e)		12,500
Deferred tax asset, net		3,961			238	(f)		4,199
Other assets		33,552			(3,417	)(g)		30,135
Total assets acquired	$	1,080,912			(6,270	)		1,074,642
Liabilities
Deposits	$	952,573			78	(h)		952,651
Borrowings		26,810			(1,439	)(i)		25,371
Other liabilities		8,515			(284	)(j)		8,231
Total liabilities assumed	$	987,898			(1,645	)		986,253
Net identifiable assets acquired over liabilities assumed								88,389
Total consideration paid								178,694
Goodwill							$	90,305

Explanation of fair value adjustments:

(a)	Represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.
(b)	Reflects the elimination of First South’s historical allowance for loan losses.
(c)	Reflects fair value adjustments on acquired branch and administrative offices based on the Company’s assessment.
(d)	Reflects the impact of acquisition accounting fair value adjustments.
(e)	Reflects the fair value adjustment to record the estimated core deposit intangible based on the Company’s assessment.
(f)	Reflects the tax impact of acquisition accounting fair value adjustments.
(g)	Reflects the fair value adjustment based on the Company’s evaluation of acquired other assets.
(h)	Represents the fair value adjustment due to interest rate factors.
(i)	Represents the fair value adjustment due to interest rate factors. (j) Reflects the fair value adjustment based on the Company’s evaluation of acquired other liabilities.

Greer Bancshares [Member]

Schedule of Assets and Liabilities Acquired [Table Text Block]

The following table presents a summary of total consideration paid by the Company at the acquisition date (dollars in thousand).

Common stock issued (1,789,523 shares at $30.30 per share)	$	54,223
Cash payments to common stockholders		4,422
Total consideration paid	$	58,645

Schedule of loans acquired at the Acquisition date

The following table summarizes the consideration paid by the Company in the merger with Greer and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date.

	As Reported			Fair Value			As Recorded by
March 18, 2017	by Greer			Adjustments			the Company
Assets	(In thousands)
Cash and cash equivalents	$	42,187			—			42,187
Securities available for sale		121,374			—			121,374
Loans held for sale		105			—			105
Loans receivable		205,209			(10,559	)(a)		194,650
Allowance for loan losses		(3,198	)		3,198	(b)		—
Premises and equipment		3,928			4,202	(c)		8,130
Foreclosed assets		42			—			42
Core deposit intangible		—			4,480	(d)		4,480
Deferred tax asset, net		3,831			(1,434	)(e)		2,397
Other assets		11,367			(241	)(f)		11,126
Total assets acquired	$	384,845			(354	)		384,491
Liabilities
Deposits	$	310,866			200	(g)		311,066
Borrowings		43,712			(3,510	)(h)		40,202
Other liabilities		7,086			512	(i)		7,598
Total liabilities assumed	$	361,664			(2,798	)		358,866
Net identifiable assets acquired over liabilities assumed								25,625
Total consideration paid								58,645
Goodwill							$	33,020

Explanation of fair value adjustments:
(a)	Adjustment represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.
(b)	Adjustment reflects the elimination of Greer’s historical allowance for loan losses.
(c)	Adjustment reflects fair value adjustments on acquired branch and administrative offices based on third party appraisals.
(d)	Adjustment reflects the fair value adjustment to record the estimated core deposit intangible based on the Company’s third party valuation report.
(e)	Adjustment reflects the tax impact of acquisition accounting fair value adjustments.
(f)	Adjustment reflects the fair value adjustment based on the Company’s evaluation of acquired other assets.
(g)	Adjustment represents the fair value adjustment due to interest rate factors.
(h)	Adjustment represents the fair value adjustment due to interest rate factors.
(i)	Adjustment reflects the fair value adjustment based on the Company’s evaluation of acquired other liabilities.

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SECURITIES (Tables)

6 Months Ended

Jun. 30, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of investment securities available for sale

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of securities available-for-sale at June 30, 2018 and December 31, 2017 follows:

	June 30, 2018									December 31, 2017
			Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
Securities available-for-sale:	(In thousands)
Municipal securities	$	200,526		2,508		(1,457	)		201,577		240,904		6,790		(344	)		247,350
US government agencies		13,000		—		(55	)		12,945		11,983		34		(9	)		12,008
Collateralized loan obligations		172,154		404		(50	)		172,508		128,080		581		(18	)		128,643
Corporate securities		6,902		90		(4	)		6,989		6,891		115		—			7,006
Mortgage-backed securities:
Agency		236,826		504		(3,574	)		233,757		243,075		1,234		(714	)		243,595
Non-agency		167,028		540		(1,684	)		165,884		94,834		551		(260	)		95,125
Total mortgage-backed securities		403,854		1,044		(5,258	)		399,641		337,909		1,785		(974	)		338,720
Trust preferred securities		11,236		1,757		(1,686	)		11,308		11,208		1,132		(2,828	)		9,512
Total	$	807,672		5,803		(8,510	)		804,968		736,975		10,437		(4,173	)		743,239

Schedule of amortized costs and fair values of investment securities, by contractual maturity

The amortized cost and fair value of debt securities by contractual maturity at June 30, 2018 follows:

	At June 30, 2018
	Amortized		Fair
	Cost		Value
	(In thousands)
Securities available-for-sale:
Less than one year	$	309		309
One to five years		9,161		9,149
Six to ten years		111,914		111,531
After ten years		686,288		683,979
Total	$	807,672		804,968

Schedule of gross realized gains and losses from sales of investment securities available-for-sale

The following table summarizes the gross realized gains and losses from sales of investment securities available-for-sale for the periods indicated.

	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2018			2017			2018			2017
				(In thousands)
Proceeds	$	34,122			43,324			85,300			81,021
Realized gains	$	55			647			69			1,020
Realized losses		(801	)		(26	)		(1,512	)		(214	)
Total investment securities gains (losses), net	$	(746	)		621			(1,443	)		806

Schedule of securities in a continuous unrealized loss position aggregated by investment category and length of time

The following tables summarize gross unrealized losses on investment securities and the fair market value of the related securities at June 30, 2018 and December 31, 2017, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.

	At June 30, 2018
	Less than 12 Months							12 Months or Greater							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
	(In thousands)
Available-for-sale:
Municipal securities	$	80,659		79,430		(1,229	)		3,574		3,346		(228	)		84,233		82,776		(1,457	)
US government agencies		13,000		12,945		(55	)		—		—		—			13,000		12,945		(55	)
Collateralized loan obligations		57,909		57,859		(50	)		—		—		—			57,909		57,859		(50	)
Corporate securities		479		475		(4	)		—		—		—			479		475		(4	)
Mortgage-backed securities:
Agency		170,067		167,006		(3,061	)		19,824		19,311		(513	)		189,891		186,317		(3,574	)
Non-agency		100,771		99,166		(1,605	)		10,691		10,613		(78	)		111,462		109,779		(1,684	)
Total mortgage-backed securities		270,838		266,172		(4,666	)		30,515		29,924		(591	)		301,353		296,096		(5,258	)
Trust preferred securities		—		—		—			8,467		6,781		(1,686	)		8,467		6,781		(1,686	)
Total	$	422,885		416,881		(6,004	)		42,556		40,051		(2,505	)		465,441		456,932		(8,510	)
	At December 31, 2017
	Less than 12 Months							12 Months or Greater							Total
	Amortized		Fair		Unrealized			Amortized		Fair		Unrealized			Amortized		Fair		Unrealized
	Cost		Value		Losses			Cost		Value		Losses			Cost		Value		Losses
	(In thousands)
Available-for-sale:
Municipal securities	$	23,849		23,631		(218	)		3,606		3,480		(126	)		27,455		27,111		(344	)
US government agencies		1,681		1,672		(9	)		—		—		—			1,681		1,672		(9	)
Collateralized loan obligations		23,000		22,982		(18	)		—		—		—			23,000		22,982		(18	)
Mortgage-backed securities:
Agency		107,501		107,011		(490	)		17,484		17,260		(224	)		124,985		124,271		(714	)
Non-agency		21,874		21,704		(170	)		9,889		9,799		(90	)		31,763		31,503		(260	)
Total mortgage-backed securities		129,375		128,715		(660	)		27,373		27,059		(314	)		156,748		155,774		(974	)
Trust preferred securities		—		—		—			8,516		5,688		(2,828	)		8,516		5,688		(2,828	)
Total	$	177,905		177,000		(905	)		39,495		36,227		(3,268	)		217,400		213,227		(4,173	)

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DERIVATIVES (Tables)

6 Months Ended

Jun. 30, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative positions of Company

The derivative positions of the Company at June 30, 2018 and December 31, 2017 are as follows:

	At June 30,				At December 31,
	2018				2017
	Fair		Notional		Fair		Notional
	Value		Value		Value		Value
	(In thousands)
Derivative assets:
Cash flow hedges:
Interest rate swaps	$	2,007		70,000		644		45,000
Non-hedging derivatives:
Interest rate swaps		2,007		45,000		964		50,000
Mortgage loan interest rate lock commitments		1,476		126,031		890		98,584
Mortgage-backed securities forward sales commitments		511		25,853		305		23,401
Total derivative assets	$	6,001		266,884		2,803		216,985
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		—		—		95		5,000
Mortgage-backed securities forward sales commitments		129		90,000		61		75,000
Total derivative liabilities	$	129		90,000		156		80,000

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LOANS RECEIVABLE, NET (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of categories of loans

Loans receivable, net at June 30, 2018 and December 31, 2017 are summarized by category as follows:

	At June 30,					At December 31,
	2018					2017
			% of Total					% of Total
All Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	699,435		28.82	%		665,774		28.70	%
Home equity		87,946		3.62	%		90,141		3.89	%
Commercial real estate		940,558		38.75	%		933,820		40.26	%
Construction and development		327,778		13.50	%		294,793		12.71	%
Consumer loans		16,041		0.66	%		19,990		0.86	%
Commercial business loans		355,463		14.65	%		315,010		13.58	%
Total gross loans receivable		2,427,221		100.00	%		2,319,528		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,414,234					2,308,050

Schedule of loan acquired non-credit impaired loans and nonacquired loans

Loans receivable, net at June 30, 2018 and December 31, 2017 for purchased non-credit impaired loans and nonacquired loans are summarized by category as follows:

	At June 30,					At December 31,
	2018					2017
Purchased Non-Credit Impaired Loans			% of Total					% of Total
(ASC 310-20) and Nonacquired Loans:	Amount		Loans			Amount		Loans
	(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	689,934		29.20	%		654,597		29.21	%
Home equity		87,855		3.72	%		89,961		4.01	%
Commercial real estate		901,372		38.15	%		891,469		39.77	%
Construction and development		320,902		13.58	%		287,437		12.83	%
Consumer loans		15,963		0.68	%		19,895		0.89	%
Commercial business loans		346,677		14.67	%		297,754		13.29	%
Total gross loans receivable		2,362,703		100.00	%		2,241,113		100.00	%
Less:
Allowance for loan losses		12,987					11,478
Total loans receivable, net	$	2,349,716					2,229,635

Loans receivable, net at June 30, 2018 for purchased credit impaired loans are summarized by category below.

	At June 30,					At December 31,
	2018					2017
Purchased Credit Impaired			% of Total					% of Total
Loans (ASC 310-30):	Amount		Loans			Amount		Loans
	(Dollars in thousands)					(Dollars in thousands)
Loans secured by real estate:
One-to-four family	$	9,501		14.73	%		11,177		14.25	%
Home equity		91		0.14	%		180		0.23	%
Commercial real estate		39,186		60.14	%		42,351		54.01	%
Construction and development		6,876		10.66	%		7,356		9.38	%
Consumer loans		78		0.11	%		95		0.12	%
Commercial business loans		8,786		13.62	%		17,256		22.01	%
Total gross loans receivable		64,518		100.00	%		78,415		100.00	%
Less:
Allowance for loan losses		—					—
Total loans receivable, net	$	64,518					78,415

Schedule of changes in the value of the accretable yield for PCI loans

The following table presents changes in the value of PCI loans receivable for the three and six months ended June 30, 2018:

	For the Three Months		For the Six Months
	Ended June 30, 2018		Ended June 30, 2018
	(In thousands)		(In thousands)
Balance at beginning of period	$	71,030	$	78,415
Net reductions for payments, foreclosures, and accretion		6,512		13,897
Balance at end of period	$	64,518	$	64,518

The following table presents changes in the value of the accretable yield for PCI loans for the three and six months ended June 30, 2018 (in thousands):

	For the Three Months			For the Six Months
	Ended June 30, 2018			Ended June 30, 2018
	(In thousands)			(In thousands)
Accretable yield, beginning of period	$	15,745		$	12,536
Additions		—			—
Accretion		(1,224	)		(2,556	)
Reclassification from nonaccretable balance, net		207			3,403
Other changes, net		(58	)		1,287
Accretable yield, end of period	$	14,670		$	14,670

Schedule of composition of gross loans outstanding, net of undisbursed amounts, by rate type

The composition of gross loans outstanding, net of undisbursed amounts, by rate type is as follows:

	At June 30,				At December 31,
	2018				2017
	(Dollars in thousands)
Variable rate loans	$	914,923	37.69	%		807,748	34.82	%
Fixed rate loans		1,512,298	62.31	%		1,511,780	65.18	%
Total loans outstanding	$	2,427,221	100.00	%		2,319,528	100.00	%

Schedule of activity in the allowance for loan losses

The following table presents activity in the allowance for loan losses for the period indicated. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Allowance for loan losses:		For the Three Months Ended June 30, 2018
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	3,010			226			4,144			2,032			75			2,873			348			12,708
Provision for loan losses			240			(24	)		205			49			153			(309	)		246			559
Charge-offs			(147	)		—			(52	)		—			(129	)		(27	)		—			(355	)
Recoveries			7			—			42			1			18			6			—			74
Balance, end of period		$	3,110			202			4,339			2,082			117			2,543			594			12,987
		For the Three Months Ended June 30, 2017
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	2,506			236			3,613			943			110			2,498			809			10,715
Provision for loan losses			237			(18	)		(283	)		4			(16	)		359			(283	)		—
Charge-offs			(19	)		—			—			—			(1	)		—			—			(20	)
Recoveries			1			—			1			1			8			44			—			55
Balance, end of period		$	2,725			218			3,331			948			101			2,901			526			10,750
Allowance for loan losses:		For the Six Months Ended June 30, 2018
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
		(In thousands)
Balance, beginning of period		$	2,719			168			3,986			1,201			79			2,840			485			11,478
Provision for loan losses			526			26			392			(155	)		118			(456	)		109			559
Charge-offs			(147	)		—			(86	)		(1	)		(138	)		(116	)		—			(488	)
Recoveries			12			8			47			1,037			58			275			—			1,437
Balance, end of period		$	3,110			202			4,339			2,082			117			2,543			594			12,987
		For the Six Months Ended June 30, 2017
		Loans Secured by Real Estate
		One-to-						Commercial			Construction
		four			Home			real			and						Commercial
		family			equity			estate			development			Consumer			business			Unallocated			Total
	(In thousands)
Balance, beginning of period		$	2,636			197			3,344			1,132			80			2,805			494			10,688
Provision for loan losses			122			21			(39	)		(186	)		20			30			32			—
Charge-offs			(35	)		—			—			—			(10	)		—			—			(45	)
Recoveries			2			—			26			2			11			66			—			107
Balance, end of period		$	2,725			218			3,331			948			101			2,901			526			10,750

Schedule of allowance for loan losses and recorded investment in loans by impairment methodology

The following table disaggregates our allowance for loan losses and recorded investment in loans by impairment methodology.

	Loans Secured by Real Estate
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
	family		equity		estate		development		Consumer		business		Unallocated		Total
	(In thousands)
At June 30, 2018:
Allowance for loan losses  ending balances:
Individually evaluated for impairment	$	204		29		142		534		—		11		—		920
Collectively evaluated for impairment		2,906		173		4,197		1,548		117		2,532		594		12,067
	$	3,110		202		4,339		2,082		117		2,543		594		12,987
Loans receivable ending balances:
Individually evaluated for impairment	$	3,698		126		4,636		1,840		19		754		—		11,073
Collectively evaluated for impairment		686,236		87,729		896,736		319,062		15,944		345,923		—		2,351,630
Purchased Credit-Impaired Loans		9,501		91		39,186		6,876		78		8,786		—		64,518
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		—		2,427,221
At December 31, 2017:
Allowance for loan losses ending balances:
Individually evaluated for impairment	$	64		29		—		—		—		16		—		109
Collectively evaluated for impairment		2,655		139		3,986		1,201		79		2,824		485		11,369
	$	2,719		168		3,986		1,201		79		2,840		485		11,478
Loans receivable ending balances:
Individually evaluated for impairment	$	3,435		108		4,811		318		26		285		—		8,983
Collectively evaluated for impairment		651,162		89,853		886,658		287,119		19,869		297,469		—		2,232,130
Purchased Credit-Impaired Loans		11,177		180		42,351		7,356		95		17,256		—		78,415
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		—		2,319,528

Schedule of impaired loans by class of loans

The following table presents impaired loans individually evaluated for impairment in the segmented portfolio categories and the corresponding allowance for loan losses as of June 30, 2018 and December 31, 2017. The recorded investment is defined as the original amount of the loan, net of any deferred costs and fees, less any principal reductions and direct charge-offs. Unpaid principal balance includes amounts previously included in charge-offs.

	At June 30, 2018						At December 31, 2017
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
	Investment		Balance		Allowance		Investment		Balance		Allowance
					(In thousands)
With no related allowance recorded:
Loans secured by real estate:
One-to-four family	$	2,250		2,375		—		2,725		2,846		—
Home equity		68		68		—		—		—		—
Commercial real estate		2,824		2,824		—		3,370		3,370		—
Construction and development		267		267		—		318		318		—
Consumer loans		19		19		—		26		26		—
Commercial business loans		599		599		—		113		114		—
		6,027		6,152		—		6,552		6,674		—
With an allowance recorded:
Loans secured by real estate:
One-to-four family		1,448		1,486		204		710		710		64
Home equity		58		58		29		108		108		29
Commercial real estate		1,812		1,894		142		1,441		1,441		—
Construction and development		1,573		1,573		534		—		—		—
Consumer loans		—		—		—		—		—		—
Commercial business loans		155		155		11		172		172		16
		5,046		5,166		920		2,431		2,431		109
Total:
Loans secured by real estate:
One-to-four family		3,698		3,861		204		3,435		3,556		64
Home equity		126		126		29		108		108		29
Commercial real estate		4,636		4,718		142		4,811		4,811		—
Construction and development		1,840		1,840		534		318		318		—
Consumer loans		19		19		—		26		26		—
Commercial business loans		754		754		11		285		286		16
	$	11,073		11,318		920		8,983		9,105		109

The following table presents the average recorded investment and interest income recognized on impaired loans individually evaluated for impairment in the segmented portfolio categories for the three and six months ended June 30, 2018 and 2017.

	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2018					2017					2018					2017
	Average		Interest			Average		Interest			Average		Interest			Average		Interest
	Recorded		Income			Recorded		Income			Recorded		Income			Recorded		Income
	Investment		Recognized			Investment		Recognized			Investment		Recognized			Investment		Recognized
			(In thousands)
With no related allowance recorded:
Loans secured by real estate:
One-to-four family	$	2,199		(14	)		3,027		(15	)		2,107		2			2,953		21
Home equity		17		—			347		9			8		1			258		12
Commercial real estate		2,971		(31	)		4,016		(37	)		3,012		49			4,043		98
Construction and development		267		5			158		8			267		9			87		8
Consumer loans		20		—			19		—			21		—			19		—
Commercial business loans		183		9			32		(16	)		103		14			35		1
		5,657		(31	)		7,599		(51	)		5,518		75			7,395		140
With an allowance recorded:
Loans secured by real estate:
One-to-four family		1,481		5			992		5			1,489		16			803		8
Home equity		88		(3	)		274		(2	)		96		—			233		(1	)
Commercial real estate		1,839		18			1,009		(67	)		1,793		39			1,014		—
Construction and development		1,447		—			—		—			922		(4	)		—		—
Consumer loans		—					—		—			—		—			—		—
Commercial business loans		159		2			205		—			164		5			211		6
		5,014		22			2,480		(64	)		4,464		56			2,261		13
Total:
Loans secured by real estate:
One-to-four family		3,680		(9	)		4,019		(10	)		3,596		18			3,756		29
Home equity		105		(3	)		621		7			104		1			491		11
Commercial real estate		4,810		(13	)		5,025		(104	)		4,805		88			5,057		98
Construction and development		1,714		5			158		8			1,189		5			87		8
Consumer loans		20		—			19		—			21		—			19		—
Commercial business loans		342		11			237		(16	)		267		19			246		7
	$	10,671		(9	)		10,079		(115	)		9,982		131			9,656		153

Schedule of aging of the recorded investment in past due loans by class of loans

A loan is considered past due if the required principal and interest payment has not been received as of the due date. The following schedule is an aging of past due loans receivable by portfolio segment as of June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
All Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	1,343		567		918		274		239		327		3,668
60-89 days past due		870		164		1,411		52		23		119		2,639
90 days or more past due		2,997		215		611		989		23		750		5,585
Total past due		5,210		946		2,940		1,315		285		1,196		11,892
Current		694,225		87,000		937,618		326,463		15,756		354,267		2,415,329
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221
	At June 30, 2018
Purchased Non-Credit	Real Estate Loans
Impaired Loans (ASC 310-20) and Nonacquired Loans:	One-to- four family		Home equity		Commercial real estate		Construction and development		Consumer		Commercial business		Total
	(In thousands)
30-59 days past due	$	1,264		556		826		274		239		327		3,486
60-89 days past due		798		164		1,411		41		23		119		2,556
90 days or more past due		2,582		210		611		87		23		750		4,263
Total past due		4,644		930		2,848		402		285		1,196		10,305
Current		685,290		86,925		898,524		320,500		15,678		345,481		2,352,398
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
	At June 30, 2018
	Real Estate Loans
Purchased Credit Impaired Loans (ASC 310-30):	One-to- four family		Home equity		Commercial real estate		Construction and development		Consumer		Commercial business		Total
	(In thousands)
30-59 days past due	$	79		11		92		—		—		—		182
60-89 days past due		72		—		—		11		—		—		83
90 days or more past due		415		5		—		902		—		—		1,322
Total past due		566		16		92		913		—		—		1,587
Current		8,935		75		39,094		5,963		78		8,786		62,931
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
All Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	8,139		1,350		1,358		2,328		108		366		13,649
60-89 days past due		1,025		109		421		—		129		185		1,869
90 days or more past due		2,580		117		689		2,482		21		59		5,948
Total past due		11,744		1,576		2,468		4,810		258		610		21,466
Current		654,030		88,565		931,352		289,983		19,732		314,400		2,298,062
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
	At December 31, 2017
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonpurchased Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	7,874		1,319		1,112		2,315		108		366		13,094
60-89 days past due		1,000		109		421		—		129		185		1,844
90 days or more past due		1,894		108		689		1,297		21		59		4,068
Total past due		10,768		1,536		2,222		3,612		258		610		19,006
Current		643,829		88,425		889,247		283,825		19,637		297,144		2,222,107
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113
	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
30-59 days past due	$	265		31		246		13		—		—		555
60-89 days past due		25		—		—		—		—		—		25
90 days or more past due		686		9		—		1,185		—		—		1,880
Total past due		976		40		246		1,198		—		—		2,460
Current		10,201		140		42,105		6,158		95		17,256		75,955
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415

Schedule of analysis of loans receivables on nonaccrual status

The following is a schedule of loans receivable, by portfolio segment, on nonaccrual at June 30, 2018 and December 31, 2017.

	At June 30,		At December 31,
	2018		2017
Loans secured by real estate:	(In thousands)
One-to-four family	$	2,909		1,927
Home equity		231		108
Commercial real estate		2,710		1,540
Construction and development		1,661		51
Consumer loans		100		22
Commercial business loans		812		313
	$	8,423		3,961

Schedule of analysis of loan portfolio by credit quality indicators

The following is a schedule of the credit quality of loans receivable, by portfolio segment, as of June 30, 2018 and December 31, 2017.

	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
Total Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	694,822		87,754		915,661		321,280		15,838		348,154		2,383,509
Special Mention		877		7		17,605		3,280		103		4,970		26,842
Substandard		3,736		185		7,292		3,218		100		2,339		16,870
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221
Performing	$	696,111		87,710		937,848		325,215		15,922		354,651		2,417,457
Nonperforming:
90 days past due still accruing		415		5		—		902		19		—		1,341
Nonaccrual		2,909		231		2,710		1,661		100		812		8,423
Total nonperforming		3,324		236		2,710		2,563		119		812		9,764
Total loans receivable	$	699,435		87,946		940,558		327,778		16,041		355,463		2,427,221

	At June 30, 2018
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonacquired Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	687,208		87,692		892,865		319,206		15,760		341,870		2,344,601
Special Mention		—		—		4,980		74		103		3,945		9,102
Substandard		2,726		163		3,527		1,622		100		862		9,000
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
Performing	$	687,025		87,624		898,662		319,241		15,844		345,865		2,354,261
Nonperforming:
90 days past due still accruing		—		—		—		—		19		—		19
Nonaccrual		2,909		231		2,710		1,661		100		812		8,423
Total nonperforming		2,909		231		2,710		1,661		119		812		8,442
Total loans receivable	$	689,934		87,855		901,372		320,902		15,963		346,677		2,362,703
	At June 30, 2018
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	7,614		62		22,796		2,074		78		6,284		38,908
Special Mention		877		7		12,625		3,206		—		1,025		17,740
Substandard		1,010		22		3,765		1,596		—		1,477		7,870
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518
Performing	$	9,086		86		39,186		5,974		78		8,786		63,196
Nonperforming:
90 days past due still accruing		415		5		—		902		—		—		1,322
Nonaccrual		—		—		—		—		—		—		—
Total nonperforming		415		—		—		—		—		—		1,322
Total loans receivable	$	9,501		91		39,186		6,876		78		8,786		64,518

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
	four		Home		real		and				Commercial
Total Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	658,031		89,919		898,328		287,491		19,817		296,038		2,249,624
Special Mention		4,086		30		28,670		4,201		35		12,339		49,361
Substandard		3,657		192		6,822		3,101		138		6,633		20,543
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
Performing	$	663,161		90,024		932,280		293,557		19,968		314,697		2,313,687
Nonperforming:
90 days past due still accruing		686		9		—		1,185		—		—		1,880
Nonaccrual		1,927		108		1,540		51		22		313		3,961
Total nonperforming		2,613		117		1,540		1,236		22		313		5,841
Total loans receivable	$	665,774		90,141		933,820		294,793		19,990		315,010		2,319,528
	At December 31, 2017
Purchased Non-Credit	Real Estate Loans
Impaired Loans	One-to-				Commercial		Construction
(ASC 310-20) and	four		Home		real		and				Commercial
Nonpurchased Loans:	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	652,508		89,853		887,458		286,857		19,785		295,470		2,231,931
Special Mention		—		—		2,526		79		—		2,067		4,672
Substandard		2,089		108		1,485		501		110		217		4,510
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113
Performing	$	652,670		89,853		889,929		287,386		19,873		297,441		2,237,152
Nonperforming:
90 days past due still accruing		—		—		—		—		—		—		—
Nonaccrual		1,927		108		1,540		51		22		313		3,961
Total nonperforming		1,927		108		1,540		51		22		313		3,961
Total loans receivable	$	654,597		89,961		891,469		287,437		19,895		297,754		2,241,113

	At December 31, 2017
	Real Estate Loans
	One-to-				Commercial		Construction
Purchased Credit Impaired	four		Home		real		and				Commercial
Loans (ASC 310-30):	family		equity		estate		development		Consumer		business		Total
	(In thousands)
Internal Risk Rating Grades:
Pass	$	5,523		66		10,870		634		32		568		17,693
Special Mention		4,086		30		26,144		4,122		35		10,272		44,689
Substandard		1,568		84		5,337		2,600		28		6,416		16,033
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415
Performing	$	10,491		171		42,351		6,171		95		17,256		76,535
Nonperforming:
90 days past due still accruing		686		9		—		1,185		—		—		1,880
Nonaccrual		—		—		—		—		—		—		—
Total nonperforming		686		9		—		1,185		—		—		1,880
Total loans receivable	$	11,177		180		42,351		7,356		95		17,256		78,415

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REAL ESTATE ACQUIRED THROUGH FORECLOSURE (Tables)

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Summary of Changes in Other Real Estate Owned

The following presents summarized activity in real estate acquired through foreclosure for the periods ended June 30, 2018 and December 31, 2017:

	At June 30,			At December 31,
	2018			2017
	(In thousands)
Balance at beginning of period	$	3,106			1,179
Additions		91			2,554
Sales		(1,345	)		(627	)
Write downs		(126	)		—
Balance at end of period	$	1,726			3,106

Schedule of composition of other real estate owned

A summary of the composition of real estate acquired through foreclosure follows:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Real estate loans:
One-to-four family	$	433		709
Construction and development		1,293		2,397
	$	1,726	$	3,106

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DEPOSITS (Tables)

6 Months Ended

Jun. 30, 2018

Banking and Thrift [Abstract]

Summary of Deposits outstanding

Deposits outstanding by type of account at June 30, 2018 and December 31, 2017 are summarized as follows:

	At June 30,		At December 31,
	2018		2017
	(In thousands)
Noninterest-bearing demand accounts	$	577,568		525,615
Interest-bearing demand accounts		584,719		551,308
Savings accounts		198,571		213,142
Money market accounts		458,558		452,734
Certificates of deposit:
Less than $250,000		788,693		755,887
$250,000 or more		100,689		106,243
Total certificates of deposit		889,382		862,130
Total deposits	$	2,708,798		2,604,929

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Summary of assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis are as follows as of June 30, 2018 and December 31, 2017:

	Quoted market		Significant other		Significant other
	price in active		observable inputs		unobservable inputs
	markets (Level 1)		(Level 2)		(Level 3)
	(In thousands)
June 30, 2018
Available-for-sale investment securities:
Municipal securities	$	—		201,577		—
US government agencies		—		12,945		—
Collateralized loan obligations		—		172,508		—
Corporate securities		—		6,989		—
Mortgage-backed securities:
Agency		—		233,757		—
Non-agency		—		165,884		—
Trust Preferred Securities		—		—		11,308
Loans held for sale		—		39,473		—
Derivative assets:
Cash flow hedges:
Interest rate swaps		2,007		—		—
Non-hedging derivatives:
Interest rate swaps		2,007		—		—
Mortgage loan interest rate lock commitments		—		1,476		—
Mortgage loan forward sales commitments		—		511		—
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		—		—		—
Mortgage-backed securities forward sales commitments		—		129		—
Total	$	4,014		835,249		11,308
December 31, 2017
Available-for-sale investment securities:
Municipal securities	$	—		247,350		—
US government agencies		—		12,008		—
Collateralized loan obligations		—		128,643		—
Corporate securities		—		7,006		—
Mortgage-backed securities:
Agency		—		243,595		—
Non-agency		—		95,125		—
Trust preferred securities		—		—		9,512
Loans held for sale		—		35,292		—
Derivative assets:
Cash flow hedges:
Interest rate swaps		644		—		—
Non-hedging derivatives:
Interest rate swaps		964		—		—
Mortgage loan interest rate lock commitments		—		890		—
Mortgage loan forward sales commitments		—		305		—
Derivative liabilities:
Non-hedging derivatives:
Interest rate swaps		95		—		—
Mortgage-backed securities forward sales commitments		—		61		—
Total	$	1,703		770,275		9,512

Summary of assets and liabilities measured at a fair value on a nonrecurring basis

Assets measured at fair value on a nonrecurring basis are as follows as of June 30, 2018 and December 31, 2017:

	Quoted market price		Significant other		Significant other
	in active markets		observable inputs		unobservable inputs
	(Level 1)		(Level 2)		(Level 3)
	(In thousands)
June 30, 2018
Impaired loans:
Loans secured by real estate:
One-to-four family	$	—		—		3,494
Home equity		—		—		97
Commercial real estate		—		—		4,494
Construction and development		—		—		1,306
Consumer loans		—		—		19
Commercial business loans		—		—		743
Real estate owned:
One-to-four family		—		—		433
Construction and development		—		—		1,293
Mortgage servicing rights		—		—		29,890
Total	$	—		—		41,769
December 31, 2017
Impaired loans:
Loans secured by real estate:
One-to-four family	$	—		—		3,371
Home equity		—		—		79
Commercial real estate		—		—		4,811
Construction and development		—		—		318
Consumer loans		—		—		26
Commercial business loans		—		—		269
Real estate owned:
One-to-four family		—		—		709
Construction and development		—		—		2,397
Mortgage servicing rights		—		—		26,255
Total	$	—		—		38,235

Schedule of significant unobservable inputs used in the fair value measurements

For Level 3 assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2018 and December 31, 2017, the significant unobservable inputs used in the fair value measurements were as follows:

	June 30, 2018 and December 31, 2017
		Significant	Significant Unobservable
	Valuation Technique	Observable Inputs	Inputs
Impaired Loans	Appraisal Value	Appraisals and or sales of comparable properties	Appraisals discounted 10% to 20% for sales commissions and other holding costs
Real Estate Owned	Appraisal Value/ Comparison Sales	Appraisals and or sales of comparable properties	Appraisals discounted 10% to 20% for sales commissions and other holding costs
Mortgage Servicing Rights	Discounted cash flows	Comparable sales	Discount rates averaging 11.5% - 13% in each period presented Prepayment rates averaging 6% - 8.5% in 2018 Prepayment rates averaging 8% - 10% in 2017

Schedule of carrying amount and estimated fair value of the Company's financial instruments

The carrying amount and estimated fair value of the Company’s financial instruments at June 30, 2018 and December 31, 2017 are as follows:

	At June 30, 2018
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Financial assets:	(In thousands)
Cash and due from banks	$	27,327		27,327		27,327		—		—
Interest-bearing cash		54,751		54,751		54,751		—		—
Securities available-for-sale		804,968		804,968		—		793,660		11,308
Federal Home Loan Bank stock		19,019		19,019		—		—		19,019
Other investments		3,429		3,429		—		—		3,429
Derivative assets		6,001		6,001		4,014		1,987		—
Loans held for sale		39,473		39,473		—		39,473		—
Loans receivable, net		2,414,234		2,422,163		—		—		2,422,163
Accrued interest receivable		12,664		12,664		—		12,664		—
Real estate acquired through foreclosure		1,726		1,726		—		—		1,726
Mortgage servicing rights		23,626		29,890		—		—		29,890
Financial liabilities:
Deposits		2,708,798		2,712,165		—		2,712,165		—
Short-term borrowed funds		354,500		354,595		—		354,595		—
Long-term debt		46,347		46,002		—		46,002		—
Derivative liabilities		129		129		—		129		—
Drafts outstanding		10,454		10,454		—		10,454		—
Advances from borrowers for insurance and taxes		4,558		4,558		—		4,558		—
Accrued interest payable		1,560		1,560		—		1,560		—
Dividends payable to stockholders		1,354		1,354		—		1,354		—

	At December 31, 2017
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
Financial assets:	(In thousands)
Cash and due from banks	$	25,254		25,254		25,254		—		—
Interest-bearing cash		55,998		55,998		55,998		—		—
Securities available-for-sale		743,239		743,239		—		733,727		9,512
Federal Home Loan Bank stock		19,065		19,065		—		—		19,065
Other investments		3,446		3,446		—		—		3,446
Derivative assets		2,803		2,803		1,608		1,195		—
Loans held for sale		35,292		35,292		—		35,292		—
Loans receivable, net		2,308,050		2,311,088		—		—		2,311,088
Accrued interest receivable		11,992		11,992				11,992
Real estate acquired through foreclosure		3,106		3,106		—		—		3,106
Mortgage servicing rights		21,003		26,255		—		—		26,255
Financial liabilities:
Deposits		2,604,929		2,597,526		—		2,597,526		—
Short-term borrowed funds		340,500		339,870		—		339,870		—
Long-term debt		72,259		71,859		—		71,859		—
Derivative liabilities		156		156		95		61		—
Drafts outstanding		7,324		7,324		—		7,324		—
Advances from borrowers for insurance and taxes		3,005		3,005		—		3,005		—
Accrued interest payable		1,126		1,126		—		1,126		—
Dividends payable to stockholders		1,051		1,051		—		1,051		—

Schedule of notional amount and estimated fair values of off-balance sheet financial instruments

	At June 30, 2018				At December 31, 2017
	Notional		Estimated		Notional		Estimated
	Amount		Fair Value		Amount		Fair Value
Off-Balance Sheet Financial Instruments:	(In thousands)
Commitments to extend credit	$	378,608		—		422,065		—
Standby letters of credit		14,329		—		4,449		—

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2018

Disclosure Earnings Per Share Tables Abstract

Schedule of reconciliation of average shares outstanding

The following is a summary of the reconciliation of weighted average shares outstanding for the three and six months ended June 30, 2018 and 2017:

	For the Three Months Ended June 30,
	2018				2017
	Basic		Diluted		Basic		Diluted
Weighted average shares outstanding		21,243,094		21,243,094		16,029,332		16,029,332
Effect of dilutive securities		—		210,945		—		150,839
Weighted average shares outstanding		21,243,094		21,454,039		16,029,332		16,180,171
	For the Six Months Ended June 30,
	2018				2017
	Basic		Diluted		Basic		Diluted
Weighted average shares outstanding		20,961,182		20,961,182		14,980,349		14,980,349
Effect of dilutive securities		—		213,754		—		164,447
Weighted average shares outstanding		20,961,182		21,174,936		14,980,349		15,144,796

The following is a summary of the reconciliation of shares issued and outstanding and unvested restricted stock awards as of June 30, 2018 and 2017 used to calculate book value per share:

	As of June 30,
	2018			2017
Issued and outstanding shares		22,570,182			16,156,943
Less nonvested restricted stock awards		(137,345	)		(101,489	)
Period end dilutive shares		22,432,837			16,055,454

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SUPPLEMENTAL SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Schedule of Selected Financial Information of Company's reportable business segments

The following tables present selected financial information for the Company’s reportable business segments for the three and six months ended June 30, 2018 and 2017:

	Community		Mortgage
For the Three Months Ended June 30, 2018	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	39,060		458		14			(55	)		39,477
Interest expense		6,066		77		506			(77	)		6,572
Net interest income (expense)		32,994		381		(492	)		22			32,905
Provision for loan losses		534		25		—			—			559
Noninterest income from external customers		5,570		5,434		23			—			11,027
Intersegment noninterest income		242		9		—			(251	)		—
Noninterest expense		19,348		4,748		275			—			24,371
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		18,924		811		(746	)		13			19,002
Income tax expense (benefit)		3,996		213		(178	)		5			4,036
Net income (loss)	$	14,928		598		(568	)		8			14,966
	Community		Mortgage
For the Three Months Ended June 30, 2017	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	21,691		427		8			(3	)		22,123
Interest expense		2,747		42		278			(42	)		3,025
Net interest income (expense)		18,944		385		(270	)		39			19,098
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		3,494		5,311		—			—			8,805
Intersegment noninterest income		242		31		—			(273	)		—
Noninterest expense		11,448		4,164		278			—			15,890
Intersegment noninterest expense		—		240		2			(242	)		—
Income (loss) before income taxes		11,232		1,323		(550	)		8			12,013
Income tax expense (benefit)		2,789		85		(204	)		3			2,673
Net income (loss)	$	8,443		1,238		(346	)		5			9,340

	Community		Mortgage
For the Six Months Ended June 30, 2018	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	76,317		889		27			(79	)		77,154
Interest expense		11,150		130		968			(130	)		12,118
Net interest income (expense)		65,167		759		(941	)		51			65,036
Provision for loan losses		534		25		—			—			559
Noninterest income from external customers		10,630		10,358		88			—			21,076
Intersegment noninterest income		483		26		—			(509	)		—
Noninterest expense		52,278		9,137		554			1			61,970
Intersegment noninterest expense		—		480		3			(483	)		—
Income (loss) before income taxes		23,468		1,501		(1,410	)		24			23,583
Income tax expense (benefit)		4,556		341		(345	)		9			4,561
Net income (loss)	$	18,912		1,160		(1,065	)		15			19,022
	Community		Mortgage
For the Six Months June 30, 2017	Banking		Banking		Other			Eliminations			Total
			(In thousands)
Interest income	$	38,949		822		13			8			39,792
Interest expense		4,965		54		459			(54	)		5,424
Net interest income (expense)		33,984		768		(446	)		62			34,368
Provision for loan losses		—		—		—			—			—
Noninterest income from external customers		5,912		10,123		—			—			16,035
Intersegment noninterest income		483		64		—			(547	)		—
Noninterest expense		22,772		8,216		488			—			31,476
Intersegment noninterest expense		—		480		3			(483	)		—
Income (loss) before income taxes		17,607		2,259		(937	)		(2	)		18,927
Income tax expense (benefit)		4,656		375		(346	)		(1	)		4,684
Net income (loss)	$	12,951		1,884		(591	)		(1	)		14,243

The following tables present selected financial information for the Company’s reportable business segments for June 30, 2018 and December 31, 2017: 

	Community		Mortgage
At June 30, 2018	Banking		Banking		Other		Eliminations			Total
					(In thousands)
Assets	$	3,690,507		83,258		584,455		(665,129	)		3,693,091
Loans receivable, net		2,397,896		31,385		—		(15,047	)		2,414,234
Loans held for sale		15,990		23,483		—		—			39,473
Deposits		2,718,920		—		—		(10,122	)		2,708,798
Borrowed funds		368,500		14,600		32,347		(14,600	)		400,847
	Community		Mortgage
At December 31, 2017	Banking		Banking		Other		Eliminations			Total
					(In thousands)
Assets	$	3,516,551		81,681		503,144		(582,359	)		3,519,017
Loans receivable, net		2,295,316		28,206		—		(15,472	)		2,308,050
Loans held for sale		5,999		29,293		—		—			35,292
Deposits		2,611,106		—		—		(6,177	)		2,604,929
Borrowed funds		380,500		15,000		32,259		(15,000	)		412,759

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Value of common stock issued to company	$ 226	$ 210
Common stock, shares authorized	50,000,000	25,000,000
Statutory Business Trusts [Member]
Principal amount owed	$ 36,000
Principal assets of the Trusts	37,100
Value of common stock issued to company	$ 1,116

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BUSINESS COMBINATIONS (Details) - USD ($) $ in Thousands	Nov. 01, 2017	Mar. 18, 2017	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Common stock issued			$ 226	$ 210
Common stock issued			22,570,182	21,022,202	16,156,943
First South Bancorp, Inc. [Member]
Common stock issued	$ 177,711
Cash payments to common stockholders	983
Total consideration paid	$ 178,694
Common stock issued	4,822,540
Greer Bancshares [Member]
Common stock issued		$ 54,223
Cash payments to common stockholders		4,422
Total consideration paid		$ 58,645
Common stock issued		1,789,523

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BUSINESS COMBINATIONS (Details 2) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Nov. 01, 2017		Mar. 18, 2017
Assets
Loans receivable	$ 813,700	$ 962,300
Business Combination, Liabilities [Abstract]
Goodwill	$ 127,592	$ 127,592
First South Bancorp, Inc. [Member]
Assets
Cash and cash equivalents			$ 66,109
Securities			186,038
Federal Home Loan Bank stock			1,593
Loans held for sale			1,282
Loans receivable			783,779
Allowance for loan losses			(9,495)
Premises and equipment			10,761
Foreclosed assets			1,922
Core deposit intangible			1,410
Deferred tax asset			3,961
Other assets			33,552
Total assets acquired			1,080,912
Business Combination, Liabilities [Abstract]
Deposits			952,573
Borrowings			26,810
Other liabilities			8,515
Total liabilities assumed			987,898
Fair Value Adjustments [Member]
Assets
Cash and cash equivalents
Securities
Federal Home Loan Bank stock
Loans held for sale
Loans receivable			(24,620)	[1]	(10,559)	[2]
Allowance for loan losses			9,495	[3]	3,198	[4]
Premises and equipment			1,500	[5]	4,202	[6]
Foreclosed assets			(556)	[7]
Core deposit intangible			11,090	[8]	4,480	[9]
Deferred tax asset			238	[10]	(1,434)	[11]
Other assets			(3,417)	[12]	(241)	[13]
Total assets acquired			(6,270)		(354)
Business Combination, Liabilities [Abstract]
Deposits			78	[14]	200	[15]
Borrowings			(1,439)	[14]	(3,510)	[15]
Other liabilities			(284)	[16]	512	[17]
Total liabilities assumed			(1,645)		(2,798)
As Recorded by the Company [Member]
Assets
Cash and cash equivalents			66,109		42,187
Securities			186,038		121,374
Federal Home Loan Bank stock			1,593
Loans held for sale			1,282
Loans receivable			759,159		194,650
Allowance for loan losses
Premises and equipment			12,261		8,130
Foreclosed assets			1,366		42
Core deposit intangible			12,500		4,480
Deferred tax asset			4,199		2,397
Other assets			30,135		11,126
Total assets acquired			1,074,642		384,491
Business Combination, Liabilities [Abstract]
Deposits			952,651		311,066
Borrowings			25,371		40,202
Other liabilities			8,231		7,598
Total liabilities assumed			986,253		358,866
Net assets acquired			88,389		25,625
Total consideration paid			178,694		58,645
Goodwill			$ 90,305		$ 33,020

[1] Represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.

[2] Adjustment represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.

[3] Reflects the elimination of First South's historical allowance for loan losses.

[4] Adjustment reflects the elimination of Greer's historical allowance for loan losses.

[5] Reflects fair value adjustments on acquired branch and administrative offices based on the Company's assessment.

[6] Adjustment reflects fair value adjustments on acquired branch and administrative offices based on third party appraisals.

[7] Reflects the impact of acquisition accounting fair value adjustments.

[8] Reflects the fair value adjustment to record the estimated core deposit intangible based on the Company's assessment.

[9] Adjustment reflects the fair value adjustment to record the estimated core deposit intangible based on the Company's third party valuation report.

[10] Reflects the tax impact of acquisition accounting fair value adjustments.

[11] Adjustment reflects the tax impact of acquisition accounting fair value adjustments.

[12] Reflects the fair value adjustment based on the Company's evaluation of acquired other assets.

[13] Adjustment reflects the fair value adjustment based on the Company's evaluation of acquired other assets.

[14] Represents the fair value adjustment due to interest rate factors.

[15] Adjustment represents the fair value adjustment due to interest rate factors.

[16] Reflects the fair value adjustment based on the Company's evaluation of acquired other liabilities.

[17] Adjustment reflects the fair value adjustment based on the Company's evaluation of acquired other liabilities.

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BUSINESS COMBINATIONS (Details 3) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Nov. 01, 2017		Mar. 18, 2017
Assets
Loans receivable	$ 813,700	$ 962,300
Liabilities
Goodwill	$ 127,592	$ 127,592
Greer Bancshares [Member]
Assets
Cash and cash equivalents					$ 42,187
Securities					121,374
Loans held for sale					105
Loans receivable					205,209
Allowance for loan losses					(3,198)
Premises and equipment					3,928
Foreclosed assets					42
Core deposit intangible
Deferred tax asset					3,831
Other assets					11,367
Total assets acquired					384,845
Liabilities
Deposits					310,866
Borrowings					43,712
Other liabilities					7,086
Total liabilities assumed					361,664
Fair Value Adjustments [Member]
Assets
Cash and cash equivalents
Securities
Loans held for sale
Loans receivable			(24,620)	[1]	(10,559)	[2]
Allowance for loan losses			9,495	[3]	3,198	[4]
Premises and equipment			1,500	[5]	4,202	[6]
Foreclosed assets			(556)	[7]
Core deposit intangible			11,090	[8]	4,480	[9]
Deferred tax asset			238	[10]	(1,434)	[11]
Other assets			(3,417)	[12]	(241)	[13]
Total assets acquired			(6,270)		(354)
Liabilities
Deposits			78	[14]	200	[15]
Borrowings			(1,439)	[14]	(3,510)	[15]
Other liabilities			(284)	[16]	512	[17]
Total liabilities assumed			(1,645)		(2,798)
As Recorded by the Company [Member]
Assets
Cash and cash equivalents			66,109		42,187
Securities			186,038		121,374
Loans held for sale					105
Loans receivable			759,159		194,650
Allowance for loan losses
Premises and equipment			12,261		8,130
Foreclosed assets			1,366		42
Core deposit intangible			12,500		4,480
Deferred tax asset			4,199		2,397
Other assets			30,135		11,126
Total assets acquired			1,074,642		384,491
Liabilities
Deposits			952,651		311,066
Borrowings			25,371		40,202
Other liabilities			8,231		7,598
Total liabilities assumed			986,253		358,866
Net assets acquired			88,389		25,625
Total consideration paid			178,694		58,645
Goodwill			$ 90,305		$ 33,020

[1] Represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.

[2] Adjustment represents the amount necessary to adjust loans to their fair value due to interest rate and credit factors.

[3] Reflects the elimination of First South's historical allowance for loan losses.

[4] Adjustment reflects the elimination of Greer's historical allowance for loan losses.

[5] Reflects fair value adjustments on acquired branch and administrative offices based on the Company's assessment.

[6] Adjustment reflects fair value adjustments on acquired branch and administrative offices based on third party appraisals.

[7] Reflects the impact of acquisition accounting fair value adjustments.

[8] Reflects the fair value adjustment to record the estimated core deposit intangible based on the Company's assessment.

[9] Adjustment reflects the fair value adjustment to record the estimated core deposit intangible based on the Company's third party valuation report.

[10] Reflects the tax impact of acquisition accounting fair value adjustments.

[11] Adjustment reflects the tax impact of acquisition accounting fair value adjustments.

[12] Reflects the fair value adjustment based on the Company's evaluation of acquired other assets.

[13] Adjustment reflects the fair value adjustment based on the Company's evaluation of acquired other assets.

[14] Represents the fair value adjustment due to interest rate factors.

[15] Adjustment represents the fair value adjustment due to interest rate factors.

[16] Reflects the fair value adjustment based on the Company's evaluation of acquired other liabilities.

[17] Adjustment reflects the fair value adjustment based on the Company's evaluation of acquired other liabilities.

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SECURITIES (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Available For Sale
Amortized Cost	$ 807,672	$ 736,975
Unrealized Gains	5,803	10,437
Unrealized Losses	(8,510)	(4,173)
Securities available for sale	804,968	743,239
Municipal securities [Member]
Available For Sale
Amortized Cost	200,526	240,904
Unrealized Gains	2,508	6,790
Unrealized Losses	(1,457)	(344)
Securities available for sale	201,577	247,350
US government agencies [Member]
Available For Sale
Amortized Cost	13,000	11,983
Unrealized Gains		34
Unrealized Losses	(55)	(9)
Securities available for sale	12,945	12,008
Collateralized loan obligations [Member]
Available For Sale
Amortized Cost	172,154	128,080
Unrealized Gains	404	581
Unrealized Losses	(50)	(18)
Securities available for sale	172,508	128,643
Corporate securities [Member]
Available For Sale
Amortized Cost	6,902	6,891
Unrealized Gains	90	115
Unrealized Losses	(4)
Securities available for sale	6,989	7,006
Mortgage-backed securities Agency [Member]
Available For Sale
Amortized Cost	236,826	243,075
Unrealized Gains	504	1,234
Unrealized Losses	(3,574)	(714)
Securities available for sale	233,757	243,595
Mortgage-backed securities Non-agency [Member]
Available For Sale
Amortized Cost	167,028	94,834
Unrealized Gains	540	551
Unrealized Losses	(1,684)	(260)
Securities available for sale	165,884	95,125
Total mortgage-backed securities [Member]
Available For Sale
Amortized Cost	403,854	337,909
Unrealized Gains	1,044	1,785
Unrealized Losses	(5,258)	(974)
Securities available for sale	399,641	338,720
Asset-backed securities [Member]
Available For Sale
Amortized Cost	11,236	11,208
Unrealized Gains	1,757	1,132
Unrealized Losses	(1,686)	(2,828)
Securities available for sale	$ 11,308	$ 9,512

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SECURITIES (Details 2) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Investment securities, Amortized Cost
Less than one year	$ 309
One to five years	9,161
Six to ten years	111,914
After ten years	686,288
Total	807,672	$ 736,975
Investment securities, Fair Value
Less than one year	309
One to five years	9,149
Six to ten years	111,531
After ten years	683,979
Securities available for sale	$ 804,968	$ 743,239

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SECURITIES (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Gross realized gains and losses, Available-for-sale
Proceeds	$ 34,122	$ 43,324	$ 85,300	$ 81,021
Realized gains	55	647	69	1,020
Realized losses	(801)	(26)	(1,512)	(214)
Total investment securities gains, net	$ (746)	$ 621	$ (1,443)	$ 806

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SECURITIES (Details 4) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Available For Sale Securities
Less than 12 Months, Amortized Cost	$ 422,885	$ 177,905
Less than 12 Months, Fair Value	416,881	177,000
Less than 12 Months, Unrealized Losses	(6,004)	(905)
Greater than 12 Months, Amortized Cost	42,556	39,495
Greater than 12 Months, Fair Value	40,051	36,227
Greater than 12 Months, Unrealized Losses	(2,505)	(3,268)
Total, Amortized Cost	465,441	217,400
Total, Fair Value	456,932	213,227
Total, Unrealized Losses	(8,510)	(4,173)
Municipal securities [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	80,659	23,849
Less than 12 Months, Fair Value	79,430	23,631
Less than 12 Months, Unrealized Losses	(1,229)	(218)
Greater than 12 Months, Amortized Cost	3,574	3,606
Greater than 12 Months, Fair Value	3,346	3,480
Greater than 12 Months, Unrealized Losses	(228)	(126)
Total, Amortized Cost	84,233	27,455
Total, Fair Value	82,776	27,111
Total, Unrealized Losses	(1,457)	(344)
US government agencies [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	13,000	1,681
Less than 12 Months, Fair Value	12,945	1,672
Less than 12 Months, Unrealized Losses	(55)	(9)
Greater than 12 Months, Amortized Cost
Greater than 12 Months, Fair Value
Greater than 12 Months, Unrealized Losses
Total, Amortized Cost	13,000	1,681
Total, Fair Value	12,945	1,672
Total, Unrealized Losses	(55)	(9)
Collateralized loan obligations [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	57,909	23,000
Less than 12 Months, Fair Value	57,859	22,982
Less than 12 Months, Unrealized Losses	(50)	(18)
Greater than 12 Months, Amortized Cost
Greater than 12 Months, Fair Value
Greater than 12 Months, Unrealized Losses
Total, Amortized Cost	57,909	23,000
Total, Fair Value	57,859	22,982
Total, Unrealized Losses	(50)	(18)
Mortgage-backed securities Agency [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	170,067	107,501
Less than 12 Months, Fair Value	167,006	107,011
Less than 12 Months, Unrealized Losses	(3,061)	(490)
Greater than 12 Months, Amortized Cost	19,824	17,484
Greater than 12 Months, Fair Value	19,311	17,260
Greater than 12 Months, Unrealized Losses	(513)	(224)
Total, Amortized Cost	189,891	124,985
Total, Fair Value	186,317	124,271
Total, Unrealized Losses	(3,574)	(714)
Mortgage-backed securities Non-agency [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	100,771	21,874
Less than 12 Months, Fair Value	99,166	21,704
Less than 12 Months, Unrealized Losses	(1,605)	(170)
Greater than 12 Months, Amortized Cost	10,691	9,889
Greater than 12 Months, Fair Value	10,613	9,799
Greater than 12 Months, Unrealized Losses	(78)	(90)
Total, Amortized Cost	111,462	31,763
Total, Fair Value	109,779	31,503
Total, Unrealized Losses	(1,684)	(260)
Total mortgage-backed securities [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	270,838	129,375
Less than 12 Months, Fair Value	266,172	128,715
Less than 12 Months, Unrealized Losses	(4,666)	(660)
Greater than 12 Months, Amortized Cost	30,515	27,373
Greater than 12 Months, Fair Value	29,924	27,059
Greater than 12 Months, Unrealized Losses	(591)	(314)
Total, Amortized Cost	301,353	156,748
Total, Fair Value	296,096	155,774
Total, Unrealized Losses	(5,258)	(974)
Asset-backed securities [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost
Less than 12 Months, Fair Value
Less than 12 Months, Unrealized Losses
Greater than 12 Months, Amortized Cost	8,467	8,516
Greater than 12 Months, Fair Value	6,781	5,688
Greater than 12 Months, Unrealized Losses	(1,686)	(2,828)
Total, Amortized Cost	8,467	8,516
Total, Fair Value	6,781	5,688
Total, Unrealized Losses	(1,686)	$ (2,828)
Corporate securities [Member]
Available For Sale Securities
Less than 12 Months, Amortized Cost	479
Less than 12 Months, Fair Value	475
Less than 12 Months, Unrealized Losses	(4)
Greater than 12 Months, Amortized Cost
Greater than 12 Months, Fair Value
Greater than 12 Months, Unrealized Losses
Total, Amortized Cost	479
Total, Fair Value	475
Total, Unrealized Losses	$ (4)

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SECURITIES (Details Narrative) $ in Thousands	Jun. 30, 2018 USD ($) Item	Dec. 31, 2017 Item
Disclosure Securities Details Abstract
Available for Sale Securities pledged for FHLB advances	$ 89,400
Available for Sale Securities pledged to secure public agency funds	178,400
Available for Sale Securities pledged for FRB advances	$ 192,900
Available-for-sale, Securities in Unrealized Loss Positions, Number of Positions | Item	221	135

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DERIVATIVES (Details) - Designated as Hedging Instrument [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Asset derivatives, Fair value	$ 6,001	$ 2,803
Notional Value, Assets	266,884	216,985
Liability derivatives, Fair value	129	156
Notional Value, Liability	90,000	80,000
Interest rate swaps [Member]
Asset derivatives, Fair value	2,007	964
Notional Value, Assets	45,000	50,000
Liability derivatives, Fair value		95
Notional Value, Liability		5,000
Interest rate swaps [Member] | Cash Flow Hedging [Member]
Asset derivatives, Fair value	2,007	644
Notional Value, Assets	70,000	45,000
Mortgage loan interest rate lock commitments [Member]
Asset derivatives, Fair value	1,476	890
Notional Value, Assets	126,031	98,584
Mortgage loan forward sales commitments [Member]
Asset derivatives, Fair value	511	305
Notional Value, Assets	25,853	23,401
Mortgage-backed securities forward sales commitments [Member]
Liability derivatives, Fair value	129	61
Notional Value, Liability	$ 90,000	$ 75,000

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LOANS RECEIVABLE, NET (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016
Total gross loans receivable	$ 2,427,221		$ 2,319,528
Percentage of Total Loan	100.00%		100.00%
Loans, allowance for loan losses	$ 12,987	$ 12,708	$ 11,478	$ 10,750	$ 10,715	$ 10,688
Loans receivable, net	2,414,234		2,308,050
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 2,362,703		$ 2,241,113
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	100.00%		100.00%
Allowance for loan losses	$ 12,987		$ 11,478
Purchased Non-Credit Impaired Loans and Nonacquired Loans, net	2,349,716		2,229,635
Purchased Credit Impaired Loans	$ 64,518	71,030	$ 78,415
Percentage of Purchased Credit Impaired Loans	100.00%		100.00%
One-to-four family [Member]
Total gross loans receivable	$ 699,435		$ 665,774
Percentage of Total Loan	28.82%		28.70%
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 689,934		$ 654,597
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	29.20%		29.21%
Purchased Credit Impaired Loans	$ 9,501		$ 11,177
Percentage of Purchased Credit Impaired Loans	14.73%		14.25%
Home equity [Member]
Total gross loans receivable	$ 87,946		$ 90,141
Percentage of Total Loan	3.62%		3.89%
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 87,855		$ 89,961
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	3.72%		4.01%
Purchased Credit Impaired Loans	$ 91		$ 180
Percentage of Purchased Credit Impaired Loans	0.14%		0.23%
Commercial real estate [Member]
Total gross loans receivable	$ 940,558		$ 933,820
Percentage of Total Loan	38.75%		40.26%
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 901,372		$ 891,469
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	38.15%		39.77%
Purchased Credit Impaired Loans	$ 39,186		$ 42,351
Percentage of Purchased Credit Impaired Loans	60.14%		54.01%
Construction and development [Member]
Total gross loans receivable	$ 327,778		$ 294,793
Percentage of Total Loan	13.50%		12.71%
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 320,902		$ 287,437
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	13.58%		12.83%
Purchased Credit Impaired Loans	$ 6,876		$ 7,356
Percentage of Purchased Credit Impaired Loans	10.66%		9.38%
Consumer loans [Member]
Total gross loans receivable	$ 16,041		$ 19,990
Percentage of Total Loan	0.66%		0.86%
Loans, allowance for loan losses	$ 117	75	$ 79	101	110	80
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 15,963		$ 19,895
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	0.68%		0.89%
Purchased Credit Impaired Loans	$ 78		$ 95
Percentage of Purchased Credit Impaired Loans	0.11%		0.12%
Commercial business loans [Member]
Total gross loans receivable	$ 355,463		$ 315,010
Percentage of Total Loan	14.65%		13.58%
Loans, allowance for loan losses	$ 2,543	$ 2,873	$ 2,840	$ 2,901	$ 2,498	$ 2,805
Purchased Non-Credit Impaired Loans and Nonacquired Loans, gross	$ 346,677		$ 297,754
Percentage of Total Purchased Non-Credit Impaired Loans and Nonacquired Loans	14.67%		13.29%
Purchased Credit Impaired Loans	$ 8,786		$ 17,256
Percentage of Purchased Credit Impaired Loans	13.62%		22.01%

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LOANS RECEIVABLE, NET (Details 2) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Loans Receivable Net
Balance at beginning of period	$ 71,030	$ 78,415
Net reductions for payments, foreclosures, and accretion	6,512	13,897
Balance at end of period	64,518	64,518
Accretable yield, beginning of period	15,745	12,536
Additions
Accretion	(1,224)	(4,817)	$ (1,451)
Reclassification from nonaccretable balance, net	207	3,403
Other changes, net	(58)	1,287
Accretable yield, end of period	14,670	14,670
Variable rate loans	$ 914,923	$ 914,923		$ 807,748
Variable rate loans (as a percentage)	37.69%	37.69%		34.82%
Fixed rate loans	$ 1,512,298	$ 1,512,298		$ 1,511,780
Fixed rate loans (as a percentage)	62.31%	62.31%		65.18%
Total loans outstanding	$ 2,427,221	$ 2,427,221		$ 2,319,528
Total loans outstanding (as a percentage)	100.00%	100.00%		100.00%

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LOANS RECEIVABLE, NET (Details 3) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	$ 12,708	$ 10,715	$ 11,478	$ 10,688
Provision for Loan Losses	559		559
Charge-Offs	(355)	(20)	(488)	(45)
Recoveries	74	55	1,437	107
Ending Balance	12,987	10,750	12,987	10,750
Consumer loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	75	110	79	80
Provision for Loan Losses	153	(16)	118	20
Charge-Offs	(129)	(1)	(138)	(10)
Recoveries	18	8	58	11
Ending Balance	117	101	117	101
Commercial business loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	2,873	2,498	2,840	2,805
Provision for Loan Losses	(309)	359	(456)	30
Charge-Offs	(27)		(116)
Recoveries	6	44	275	66
Ending Balance	2,543	2,901	2,543	2,901
Unallocated [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	348	809	485	494
Provision for Loan Losses	246	(283)	109	32
Charge-Offs
Recoveries
Ending Balance	594	526	594	526
Mortgage Receivables [Member] | One-to-four family [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	3,010	2,506	2,719	2,636
Provision for Loan Losses	240	237	526	122
Charge-Offs	(147)	(19)	(147)	(35)
Recoveries	7	1	12	2
Ending Balance	3,110	2,725	3,110	2,725
Mortgage Receivables [Member] | Home equity [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	226	236	168	197
Provision for Loan Losses	(24)	(18)	26	21
Charge-Offs
Recoveries			8
Ending Balance	202	218	202	218
Mortgage Receivables [Member] | Commercial real estate [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	4,144	3,613	3,986	3,344
Provision for Loan Losses	205	(283)	392	(39)
Charge-Offs	(52)		(86)
Recoveries	42	1	47	26
Ending Balance	4,339	3,331	4,339	3,331
Mortgage Receivables [Member] | Construction and development [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Beginning Balance	2,032	943	1,201	1,132
Provision for Loan Losses	49	4	(155)	(186)
Charge-Offs			(1)
Recoveries	1	1	1,037	2
Ending Balance	$ 2,082	$ 948	$ 2,082	$ 948

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LOANS RECEIVABLE, NET (Details 4) - USD ($) $ in Thousands	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment	$ 920		$ 109
Loans Collectively Evaluated for Impairment	12,067		11,369
Ending Balance	12,987		11,478
Loans receivable ending balances:
Individually Evaluated for Impairment	11,073		8,983
Collectively Evaluated for Impairment	2,351,630		2,232,130
Purchased Credit Impaired Loans	64,518	$ 71,030	78,415
Total	2,427,221		2,319,528
One-to-four family [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment	204		64
Loans Collectively Evaluated for Impairment	2,906		2,655
Ending Balance	3,110		2,719
Loans receivable ending balances:
Individually Evaluated for Impairment	3,698		3,435
Collectively Evaluated for Impairment	686,236		651,162
Purchased Credit Impaired Loans	9,501		11,177
Total	699,435		665,774
Home equity [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment	29		29
Loans Collectively Evaluated for Impairment	173		139
Ending Balance	202		168
Loans receivable ending balances:
Individually Evaluated for Impairment	126		108
Collectively Evaluated for Impairment	87,729		89,853
Purchased Credit Impaired Loans	91		180
Total	87,946		90,141
Commercial real estate [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment	142
Loans Collectively Evaluated for Impairment	4,197		3,986
Ending Balance	4,339		3,986
Loans receivable ending balances:
Individually Evaluated for Impairment	4,636		4,811
Collectively Evaluated for Impairment	896,736		886,658
Purchased Credit Impaired Loans	39,186		42,351
Total	940,558		933,820
Construction and development [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment	534
Loans Collectively Evaluated for Impairment	1,548		1,201
Ending Balance	2,082		1,201
Loans receivable ending balances:
Individually Evaluated for Impairment	1,840		318
Collectively Evaluated for Impairment	319,062		287,119
Purchased Credit Impaired Loans	6,876		7,356
Total	327,778		294,793
Consumer loans [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment
Loans Collectively Evaluated for Impairment	117		79
Ending Balance	117		79
Loans receivable ending balances:
Individually Evaluated for Impairment	19		26
Collectively Evaluated for Impairment	15,944		19,869
Purchased Credit Impaired Loans	78		95
Total	16,041		19,990
Commercial business loans [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment	11		16
Loans Collectively Evaluated for Impairment	2,532		2,824
Ending Balance	2,543		2,840
Loans receivable ending balances:
Individually Evaluated for Impairment	754		285
Collectively Evaluated for Impairment	345,923		297,469
Purchased Credit Impaired Loans	8,786		17,256
Total	355,463		315,010
Unallocated [Member]
Allowance for loan losses ending balances:
Loans Individually Evaluated for Impairment
Loans Collectively Evaluated for Impairment	594		485
Ending Balance	594		485
Loans receivable ending balances:
Individually Evaluated for Impairment
Collectively Evaluated for Impairment
Purchased Credit Impaired Loans
Total

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LOANS RECEIVABLE, NET (Details 5) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	$ 6,027		$ 6,027		$ 6,552
Impaired Financing Receivable, with Related Allowance, Recorded Investment	5,046		5,046		2,431
Impaired Financing Receivable, Recorded Investment	11,073		11,073		8,983
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	6,152		6,152		6,674
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	5,166		5,166		2,431
Impaired Financing Receivable, Unpaid Principal Balance	11,318		11,318		9,105
Impaired Financing Receivable, Related Allowance	920		920		109
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	5,657	$ 7,599	5,518	$ 7,395
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	5,014	2,480	4,464	2,261
Impaired Financing Receivable, Average Recorded Investment	10,671	10,079	9,982	9,656
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	(31)	(51)	75	140
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	22	(64)	56	13
Impaired Financing Receivable, Interest Income, Accrual Method	(9)	(115)	131	153
One-to-four family [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,250		2,250		2,725
Impaired Financing Receivable, with Related Allowance, Recorded Investment	1,448		1,448		710
Impaired Financing Receivable, Recorded Investment	3,698		3,698		3,435
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,375		2,375		2,846
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	1,486		1,486		710
Impaired Financing Receivable, Unpaid Principal Balance	3,861		3,861		3,556
Impaired Financing Receivable, Related Allowance	204		204		64
Home equity [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	68		68
Impaired Financing Receivable, with Related Allowance, Recorded Investment	58		58		108
Impaired Financing Receivable, Recorded Investment	126		126		108
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	68		68
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	58		58		108
Impaired Financing Receivable, Unpaid Principal Balance	126		126		108
Impaired Financing Receivable, Related Allowance	29		29		29
Commercial real estate [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	2,824		2,824		3,370
Impaired Financing Receivable, with Related Allowance, Recorded Investment	1,812		1,812		1,441
Impaired Financing Receivable, Recorded Investment	4,636		4,636		4,811
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	2,824		2,824		3,370
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	1,894		1,894		1,441
Impaired Financing Receivable, Unpaid Principal Balance	4,718		4,718		4,811
Impaired Financing Receivable, Related Allowance	142		142
Construction and development [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	267		267		318
Impaired Financing Receivable, with Related Allowance, Recorded Investment	1,573		1,573
Impaired Financing Receivable, Recorded Investment	1,840		1,840		318
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	267		267		318
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	1,573		1,573
Impaired Financing Receivable, Unpaid Principal Balance	1,840		1,840		318
Impaired Financing Receivable, Related Allowance	534		534
Consumer loans [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	19		19		26
Impaired Financing Receivable, with Related Allowance, Recorded Investment
Impaired Financing Receivable, Recorded Investment	19		19		26
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	19		19		26
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance
Impaired Financing Receivable, Unpaid Principal Balance	19		19		26
Impaired Financing Receivable, Related Allowance
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	20	19	21	19
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment
Impaired Financing Receivable, Average Recorded Investment	20	19	21	19
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method
Impaired Financing Receivable, Interest Income, Accrual Method
Commercial business loans [Member]
Impaired Financing Receivable, Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Recorded Investment	599		599		113
Impaired Financing Receivable, with Related Allowance, Recorded Investment	155		155		172
Impaired Financing Receivable, Recorded Investment	754		754		285
Impaired Financing Receivable, Unpaid Principal Balance [Abstract]
Impaired Financing Receivable, with No Related Allowance, Unpaid Principal Balance	599		599		114
Impaired Financing Receivable, with Related Allowance, Unpaid Principal Balance	155		155		172
Impaired Financing Receivable, Unpaid Principal Balance	754		754		286
Impaired Financing Receivable, Related Allowance	11		11		$ 16
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	183	32	103	35
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	159	205	164	211
Impaired Financing Receivable, Average Recorded Investment	342	237	267	246
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	9	(16)	14	1
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	2		5	6
Impaired Financing Receivable, Interest Income, Accrual Method	11	(16)	19	7
Mortgage Receivables [Member] | One-to-four family [Member]
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	2,199	3,027	2,107	2,953
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	1,481	992	1,489	803
Impaired Financing Receivable, Average Recorded Investment	3,680	4,019	3,596	3,756
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	(14)	(15)	2	21
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	5	5	16	8
Impaired Financing Receivable, Interest Income, Accrual Method	(9)	(10)	18	29
Mortgage Receivables [Member] | Home equity [Member]
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	17	347	8	258
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	88	274	96	233
Impaired Financing Receivable, Average Recorded Investment	105	621	104	491
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method		9	1	12
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	(3)	(2)		(1)
Impaired Financing Receivable, Interest Income, Accrual Method	(3)	7	1	11
Mortgage Receivables [Member] | Commercial real estate [Member]
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	2,971	4,016	3,012	4,043
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	1,839	1,009	1,793	1,014
Impaired Financing Receivable, Average Recorded Investment	4,810	5,025	4,805	5,057
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	(31)	(37)	49	98
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method	18	(67)	39
Impaired Financing Receivable, Interest Income, Accrual Method	(13)	(104)	88	98
Mortgage Receivables [Member] | Construction and development [Member]
Impaired Financing Receivable, Average Recorded Investment [Abstract]
Impaired Financing Receivable, with No Related Allowance, Average Recorded Investment	267	158	267	87
Impaired Financing Receivable, with Related Allowance, Average Recorded Investment	1,447		922
Impaired Financing Receivable, Average Recorded Investment	1,714	158	1,189	87
Impaired Financing Receivable, Interest Income, Accrual Method [Abstract]
Impaired Financing Receivable, with No Related Allowance, Interest Income, Accrual Method	5	8	9	8
Impaired Financing Receivable, with Related Allowance, Interest Income, Accrual Method			(4)
Impaired Financing Receivable, Interest Income, Accrual Method	$ 5	$ 8	$ 5	$ 8

XML

LOANS RECEIVABLE, NET (Details 6) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Aging of the recorded investment in past due loans by class of loans
Total Past Due	$ 11,892	$ 21,466
Current	2,415,329	2,298,062
Total loans receivable	2,427,221	2,319,528
30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	3,668	13,649
60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	2,639	1,869
90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	5,585	5,948
One-to-four family [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	5,210	11,744
Current	694,225	654,030
Total loans receivable	699,435	665,774
One-to-four family [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,343	8,139
One-to-four family [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	870	1,025
One-to-four family [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	2,997	2,580
Home equity [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	946	1,576
Current	87,000	88,565
Total loans receivable	87,946	90,141
Home equity [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	567	1,350
Home equity [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	164	109
Home equity [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	215	117
Commercial real estate [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	2,940	2,468
Current	937,618	931,352
Total loans receivable	940,558	933,820
Commercial real estate [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	918	1,358
Commercial real estate [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,411	421
Commercial real estate [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	611	689
Construction and development [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,315	4,810
Current	326,463	289,983
Total loans receivable	327,778	294,793
Construction and development [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	274	2,328
Construction and development [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	52
Construction and development [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	989	2,482
Consumer loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	285	258
Current	15,756	19,732
Total loans receivable	16,041	19,990
Consumer loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	239	108
Consumer loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	23	129
Consumer loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	23	21
Commercial business loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,196	610
Current	354,267	314,400
Total loans receivable	355,463	315,010
Commercial business loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	327	366
Commercial business loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	119	185
Commercial business loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	750	59
Purchased Credit Impaired Loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,587	2,460
Current	62,931	75,955
Total loans receivable	64,518	78,415
Purchased Credit Impaired Loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	182	555
Purchased Credit Impaired Loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	83	25
Purchased Credit Impaired Loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,322	1,880
Purchased Credit Impaired Loans [Member] | One-to-four family [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	566	976
Current	8,935	10,201
Total loans receivable	9,501	11,177
Purchased Credit Impaired Loans [Member] | One-to-four family [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	79	265
Purchased Credit Impaired Loans [Member] | One-to-four family [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	72	25
Purchased Credit Impaired Loans [Member] | One-to-four family [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	415	686
Purchased Credit Impaired Loans [Member] | Home equity [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	16	40
Current	75	140
Total loans receivable	91	180
Purchased Credit Impaired Loans [Member] | Home equity [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	11	31
Purchased Credit Impaired Loans [Member] | Home equity [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Home equity [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	5	9
Purchased Credit Impaired Loans [Member] | Commercial real estate [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	92	246
Current	39,094	42,105
Total loans receivable	39,186	42,351
Purchased Credit Impaired Loans [Member] | Commercial real estate [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	93	246
Purchased Credit Impaired Loans [Member] | Commercial real estate [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Commercial real estate [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Construction and development [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	913	1,198
Current	5,963	6,158
Total loans receivable	6,876	7,356
Purchased Credit Impaired Loans [Member] | Construction and development [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due		13
Purchased Credit Impaired Loans [Member] | Construction and development [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	11
Purchased Credit Impaired Loans [Member] | Construction and development [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,067	1,185
Purchased Credit Impaired Loans [Member] | Consumer loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Current	78	95
Total loans receivable	78	95
Purchased Credit Impaired Loans [Member] | Consumer loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Consumer loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Consumer loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Commercial business loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Current	8,786	17,256
Total loans receivable	8,786	17,256
Purchased Credit Impaired Loans [Member] | Commercial business loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Credit Impaired Loans [Member] | Commercial business loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1
Purchased Credit Impaired Loans [Member] | Commercial business loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due
Purchased Non Credit Impaired Loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	10,305	19,006
Current	2,352,398	2,222,107
Total loans receivable	2,362,703	2,241,113
Purchased Non Credit Impaired Loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	3,486	13,094
Purchased Non Credit Impaired Loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	2,556	1,844
Purchased Non Credit Impaired Loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	4,263	4,068
Purchased Non Credit Impaired Loans [Member] | One-to-four family [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	4,644	10,768
Current	685,290	643,829
Total loans receivable	689,934	654,597
Purchased Non Credit Impaired Loans [Member] | One-to-four family [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,264	7,874
Purchased Non Credit Impaired Loans [Member] | One-to-four family [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	798	1,000
Purchased Non Credit Impaired Loans [Member] | One-to-four family [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	2,582	1,894
Purchased Non Credit Impaired Loans [Member] | Home equity [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	930	1,536
Current	86,925	88,425
Total loans receivable	87,855	89,961
Purchased Non Credit Impaired Loans [Member] | Home equity [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	556	1,319
Purchased Non Credit Impaired Loans [Member] | Home equity [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	164	109
Purchased Non Credit Impaired Loans [Member] | Home equity [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	210	108
Purchased Non Credit Impaired Loans [Member] | Commercial real estate [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	2,848	2,222
Current	898,524	889,247
Total loans receivable	901,372	891,469
Purchased Non Credit Impaired Loans [Member] | Commercial real estate [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	826	1,112
Purchased Non Credit Impaired Loans [Member] | Commercial real estate [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,411	421
Purchased Non Credit Impaired Loans [Member] | Commercial real estate [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	611	689
Purchased Non Credit Impaired Loans [Member] | Construction and development [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	402	3,612
Current	320,500	283,825
Total loans receivable	320,902	287,437
Purchased Non Credit Impaired Loans [Member] | Construction and development [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	274	2,315
Purchased Non Credit Impaired Loans [Member] | Construction and development [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	41
Purchased Non Credit Impaired Loans [Member] | Construction and development [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	87	1,297
Purchased Non Credit Impaired Loans [Member] | Consumer loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	285	258
Current	15,678	19,637
Total loans receivable	15,963	19,895
Purchased Non Credit Impaired Loans [Member] | Consumer loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	239	108
Purchased Non Credit Impaired Loans [Member] | Consumer loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	23	129
Purchased Non Credit Impaired Loans [Member] | Consumer loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	23	21
Purchased Non Credit Impaired Loans [Member] | Commercial business loans [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	1,196	610
Current	345,481	297,144
Total loans receivable	346,677	297,754
Purchased Non Credit Impaired Loans [Member] | Commercial business loans [Member] | 30-59 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	327	366
Purchased Non Credit Impaired Loans [Member] | Commercial business loans [Member] | 60-89 days past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	119	185
Purchased Non Credit Impaired Loans [Member] | Commercial business loans [Member] | 90 days or more past due [Member]
Aging of the recorded investment in past due loans by class of loans
Total Past Due	$ 750	$ 59

XML

LOANS RECEIVABLE, NET (Details 7) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Nonaccrual	$ 9,764	$ 5,841
Nonperforming Financing Receivable [Member]
Nonaccrual	8,423	3,961
One-to-four family [Member]
Nonaccrual	3,324	2,613
Home equity [Member]
Nonaccrual	236	117
Commercial real estate [Member]
Nonaccrual	2,710	1,540
Construction and development [Member]
Nonaccrual	2,563	1,236
Consumer loans [Member]
Nonaccrual	119	22
Consumer loans [Member] | Nonperforming Financing Receivable [Member]
Nonaccrual	100	22
Commercial business loans [Member]
Nonaccrual	812	313
Commercial business loans [Member] | Nonperforming Financing Receivable [Member]
Nonaccrual	812	313
Mortgage Receivables [Member] | One-to-four family [Member] | Nonperforming Financing Receivable [Member]
Nonaccrual	2,909	1,927
Mortgage Receivables [Member] | Home equity [Member] | Nonperforming Financing Receivable [Member]
Nonaccrual	231	108
Mortgage Receivables [Member] | Commercial real estate [Member] | Nonperforming Financing Receivable [Member]
Nonaccrual	2,710	1,540
Mortgage Receivables [Member] | Construction and development [Member] | Nonperforming Financing Receivable [Member]
Nonaccrual	$ 1,661	$ 51

XML

LOANS RECEIVABLE, NET (Details 8) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Total loans receivable	$ 2,427,221	$ 2,319,528
Purchased Non Credit Impaired Loans [Member]
Total loans receivable	2,362,703	2,241,113
Purchased Credit Impaired Loans [Member]
Total loans receivable	64,518	78,415
Pass [Member]
Total loans receivable	2,383,509	2,249,624
Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	2,344,601	2,231,931
Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	38,908	17,693
Special Mention [Member]
Total loans receivable	26,842	49,361
Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	9,102	4,672
Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	17,740	44,689
Substandard [Member]
Total loans receivable	16,870	20,543
Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	9,000	4,510
Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	7,870	16,033
One-to-four family [Member]
Total loans receivable	699,435	665,774
One-to-four family [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	689,934	654,597
One-to-four family [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	9,501	11,177
One-to-four family [Member] | Pass [Member]
Total loans receivable	694,822	658,031
One-to-four family [Member] | Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	687,208	652,508
One-to-four family [Member] | Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	7,614	5,523
One-to-four family [Member] | Special Mention [Member]
Total loans receivable	877	4,086
One-to-four family [Member] | Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable
One-to-four family [Member] | Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	877	4,086
One-to-four family [Member] | Substandard [Member]
Total loans receivable	3,736	3,657
One-to-four family [Member] | Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	2,726	2,089
One-to-four family [Member] | Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	1,010	1,568
Home equity [Member]
Total loans receivable	87,946	90,141
Home equity [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	87,855	89,961
Home equity [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	91	180
Home equity [Member] | Pass [Member]
Total loans receivable	87,754	89,919
Home equity [Member] | Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	87,692	89,853
Home equity [Member] | Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	62	66
Home equity [Member] | Special Mention [Member]
Total loans receivable	7	30
Home equity [Member] | Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable
Home equity [Member] | Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	7	30
Home equity [Member] | Substandard [Member]
Total loans receivable	185	192
Home equity [Member] | Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	163	108
Home equity [Member] | Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	22	84
Commercial real estate [Member]
Total loans receivable	940,558	933,820
Commercial real estate [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	901,372	891,469
Commercial real estate [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	39,186	42,351
Commercial real estate [Member] | Pass [Member]
Total loans receivable	915,661	898,328
Commercial real estate [Member] | Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	892,865	887,458
Commercial real estate [Member] | Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	22,796	10,870
Commercial real estate [Member] | Special Mention [Member]
Total loans receivable	17,605	28,670
Commercial real estate [Member] | Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	4,980	2,526
Commercial real estate [Member] | Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	12,625	26,144
Commercial real estate [Member] | Substandard [Member]
Total loans receivable	7,292	6,822
Commercial real estate [Member] | Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	3,527	1,485
Commercial real estate [Member] | Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	3,765	5,337
Construction and development [Member]
Total loans receivable	327,778	294,793
Construction and development [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	320,902	287,437
Construction and development [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	6,876	7,356
Construction and development [Member] | Pass [Member]
Total loans receivable	321,280	287,491
Construction and development [Member] | Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	319,206	286,857
Construction and development [Member] | Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	2,074	634
Construction and development [Member] | Special Mention [Member]
Total loans receivable	3,280	4,201
Construction and development [Member] | Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	74	79
Construction and development [Member] | Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	3,206	4,122
Construction and development [Member] | Substandard [Member]
Total loans receivable	3,218	3,101
Construction and development [Member] | Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	1,622	501
Construction and development [Member] | Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	1,596	2,600
Consumer loans [Member]
Total loans receivable	16,041	19,990
Consumer loans [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	15,963	19,895
Consumer loans [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	78	95
Consumer loans [Member] | Pass [Member]
Total loans receivable	15,838	19,817
Consumer loans [Member] | Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	15,760	19,785
Consumer loans [Member] | Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	78	32
Consumer loans [Member] | Special Mention [Member]
Total loans receivable	103	35
Consumer loans [Member] | Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	103
Consumer loans [Member] | Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable		35
Consumer loans [Member] | Substandard [Member]
Total loans receivable	100	138
Consumer loans [Member] | Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	100	110
Consumer loans [Member] | Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable		28
Commercial business loans [Member]
Total loans receivable	355,463	315,010
Commercial business loans [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	346,677	297,754
Commercial business loans [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	8,786	17,256
Commercial business loans [Member] | Pass [Member]
Total loans receivable	348,154	296,038
Commercial business loans [Member] | Pass [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	341,870	295,470
Commercial business loans [Member] | Pass [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	6,284	568
Commercial business loans [Member] | Special Mention [Member]
Total loans receivable	4,970	12,339
Commercial business loans [Member] | Special Mention [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	3,945	2,067
Commercial business loans [Member] | Special Mention [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	1,025	10,272
Commercial business loans [Member] | Substandard [Member]
Total loans receivable	2,339	6,633
Commercial business loans [Member] | Substandard [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	862	217
Commercial business loans [Member] | Substandard [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	$ 1,477	$ 6,416

XML

LOANS RECEIVABLE, NET (Details 9) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Total loans receivable	$ 2,427,221	$ 2,319,528
Nonaccrual	9,764	5,841
Purchased Credit Impaired Loans [Member]
Total loans receivable	64,518	78,415
Nonaccrual	1,322	1,880
Purchased Non Credit Impaired Loans [Member]
Total loans receivable	2,362,703	2,241,113
Nonaccrual	8,442	3,961
Performing Financing Receivable [Member]
Total loans receivable	2,417,457	2,313,687
Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	63,196	76,535
Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	2,354,261	2,237,152
Nonperforming Financing Receivable [Member]
90 days or more past due	1,341	1,880
Nonaccrual	8,423	3,961
Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due	1,322	1,880
Nonaccrual
Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due	19
Nonaccrual	8,423	3,961
One-to-four family [Member]
Total loans receivable	699,435	665,774
Nonaccrual	3,324	2,613
One-to-four family [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	9,501	11,177
Nonaccrual	415	686
One-to-four family [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	689,934	654,597
Nonaccrual	2,909	1,927
Home equity [Member]
Total loans receivable	87,946	90,141
Nonaccrual	236	117
Home equity [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	91	180
Nonaccrual	5	9
Home equity [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	87,855	89,961
Nonaccrual	231	108
Commercial real estate [Member]
Total loans receivable	940,558	933,820
Nonaccrual	2,710	1,540
Commercial real estate [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	39,186	42,351
Nonaccrual
Commercial real estate [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	901,372	891,469
Nonaccrual	2,710	1,540
Construction and development [Member]
Total loans receivable	327,778	294,793
Nonaccrual	2,563	1,236
Construction and development [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	6,876	7,356
Nonaccrual	902	1,185
Construction and development [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	320,902	287,437
Nonaccrual	1,661	22
Consumer loans [Member]
Total loans receivable	16,041	19,990
Nonaccrual	119	22
Consumer loans [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	78	95
Nonaccrual
Consumer loans [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	15,963	19,895
Nonaccrual	119
Consumer loans [Member] | Performing Financing Receivable [Member]
Total loans receivable	15,922	19,968
Consumer loans [Member] | Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	78	95
Consumer loans [Member] | Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	15,844	19,873
Consumer loans [Member] | Nonperforming Financing Receivable [Member]
90 days or more past due	19
Nonaccrual	100	22
Consumer loans [Member] | Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual
Consumer loans [Member] | Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due	19
Nonaccrual	100	22
Commercial business loans [Member]
Total loans receivable	355,463	315,010
Nonaccrual	812	313
Commercial business loans [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	8,786	17,256
Commercial business loans [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	346,677	297,754
Nonaccrual	812	313
Commercial business loans [Member] | Performing Financing Receivable [Member]
Total loans receivable	354,651	314,697
Commercial business loans [Member] | Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	8,786	17,256
Commercial business loans [Member] | Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	345,865	297,441
Commercial business loans [Member] | Nonperforming Financing Receivable [Member]
90 days or more past due
Nonaccrual	812	313
Commercial business loans [Member] | Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual
Commercial business loans [Member] | Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual	812	313
Mortgage Receivables [Member] | One-to-four family [Member] | Performing Financing Receivable [Member]
Total loans receivable	696,111	663,161
Mortgage Receivables [Member] | One-to-four family [Member] | Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	9,086	10,491
Mortgage Receivables [Member] | One-to-four family [Member] | Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	687,025	652,670
Mortgage Receivables [Member] | One-to-four family [Member] | Nonperforming Financing Receivable [Member]
90 days or more past due	415	686
Nonaccrual	2,909	1,927
Mortgage Receivables [Member] | One-to-four family [Member] | Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due	415	686
Nonaccrual
Mortgage Receivables [Member] | One-to-four family [Member] | Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual	2,909	1,927
Mortgage Receivables [Member] | Home equity [Member] | Performing Financing Receivable [Member]
Total loans receivable	87,710	90,024
Mortgage Receivables [Member] | Home equity [Member] | Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	86	171
Mortgage Receivables [Member] | Home equity [Member] | Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	87,624	89,853
Mortgage Receivables [Member] | Home equity [Member] | Nonperforming Financing Receivable [Member]
90 days or more past due	5	9
Nonaccrual	231	108
Mortgage Receivables [Member] | Home equity [Member] | Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due	5	9
Nonaccrual
Mortgage Receivables [Member] | Home equity [Member] | Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual	231	108
Mortgage Receivables [Member] | Commercial real estate [Member] | Performing Financing Receivable [Member]
Total loans receivable	937,848	932,280
Mortgage Receivables [Member] | Commercial real estate [Member] | Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	39,186	42,351
Mortgage Receivables [Member] | Commercial real estate [Member] | Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	898,662	889,929
Mortgage Receivables [Member] | Commercial real estate [Member] | Nonperforming Financing Receivable [Member]
90 days or more past due
Nonaccrual	2,710	1,540
Mortgage Receivables [Member] | Commercial real estate [Member] | Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual
Mortgage Receivables [Member] | Commercial real estate [Member] | Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual	2,710	1,540
Mortgage Receivables [Member] | Construction and development [Member] | Purchased Non Credit Impaired Loans [Member]
Nonaccrual		51
Mortgage Receivables [Member] | Construction and development [Member] | Performing Financing Receivable [Member]
Total loans receivable	325,215	293,557
Mortgage Receivables [Member] | Construction and development [Member] | Performing Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
Total loans receivable	5,974	6,171
Mortgage Receivables [Member] | Construction and development [Member] | Performing Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
Total loans receivable	319,241	287,386
Mortgage Receivables [Member] | Construction and development [Member] | Nonperforming Financing Receivable [Member]
90 days or more past due	902	1,185
Nonaccrual	1,661	51
Mortgage Receivables [Member] | Construction and development [Member] | Nonperforming Financing Receivable [Member] | Purchased Credit Impaired Loans [Member]
90 days or more past due	902	1,185
Nonaccrual
Mortgage Receivables [Member] | Construction and development [Member] | Nonperforming Financing Receivable [Member] | Purchased Non Credit Impaired Loans [Member]
90 days or more past due
Nonaccrual	$ 1,661	$ 51

XML

LOANS RECEIVABLE, NET (Details Narrative) $ in Thousands	6 Months Ended
	Jun. 30, 2018 USD ($) Item	Jun. 30, 2017 USD ($) Item	Dec. 31, 2017 USD ($)
Loans receivable	$ 813,700		$ 962,300
Loans designated as troubled debt restructurings	6,300	$ 6,700	6,500
Troubled debt restructurings, still accruing	$ 5,000	$ 5,500	$ 5,300
Mortgage Receivables [Member] | Commercial and Residential real estate [Member]
Number of Contracts due to modification identified as a TDR | Item	1
Pre-Modification Recorded Investment	$ 135
Post-Modification Recorded Investment	$ 135
Mortgage Receivables [Member] | Commercial real estate [Member]
Number of Contracts due to modification identified as a TDR | Item		2
Pre-Modification Recorded Investment		$ 608
Post-Modification Recorded Investment		$ 608

XML

REAL ESTATE ACQUIRED THROUGH FORECLOSURE (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Real Estate Acquired Through Foreclosure
Balance at beginning of period	$ 3,106	$ 1,179
Additions	91	2,554
Sales	(1,345)	(627)
Write downs	(126)
Balance at end of period	$ 1,726	$ 3,106

XML

REAL ESTATE ACQUIRED THROUGH FORECLOSURE (Details 2) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Real Estate Acquired Through Foreclosure	$ 1,726	$ 3,106	$ 1,179
One-to-four family [Member]
Real Estate Acquired Through Foreclosure	433	709
Construction and development [Member]
Real Estate Acquired Through Foreclosure	$ 1,293	$ 2,397

XML

DEPOSITS (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Disclosure Deposits Details Abstract
Noninterest-bearing demand accounts	$ 577,568	$ 525,615
Interest-bearing demand accounts	584,719	551,308
Savings accounts	198,571	213,142
Money market accounts	458,558	452,734
Certificates of deposit:
Less than $250,000	788,693	755,887
$250,000 or more	100,689	106,243
Total certificates of deposit	889,382	862,130
Total deposits	2,708,798	2,604,929
Brokered certificates of deposit	110,500	99,200
Institutional certificates of deposit	$ 57,100	$ 39,100

XML

ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Securities available for sale	$ 804,968	$ 743,239
Loans held for sale	39,473	35,292
Derivative Asset	6,001	2,803
Brokered deposits	110,500	99,200
Derivative Liability	129	156
Municipal securities [Member]
Securities available for sale	201,577	247,350
US government agencies [Member]
Securities available for sale	12,945	12,008
Mortgage-backed securities Agency [Member]
Securities available for sale	233,757	243,595
Mortgage-backed securities Non-agency [Member]
Securities available for sale	165,884	95,125
Collateralized loan obligations [Member]
Securities available for sale	172,508	128,643
Asset-backed securities [Member]
Securities available for sale	11,308	9,512
Corporate securities [Member]
Securities available for sale	6,989	7,006
Fair Value, Inputs, Level 1 [Member]
Securities available for sale
Loans held for sale
Derivative Asset	4,014	1,608
Derivative Liability		95
Fair Value, Inputs, Level 2 [Member]
Securities available for sale	793,660	733,727
Loans held for sale	39,473	35,292
Derivative Asset	1,987	1,195
Derivative Liability	129	61
Fair Value, Inputs, Level 3 [Member]
Securities available for sale	11,308	9,512
Loans held for sale
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Loans held for sale
Brokered deposits
Assets and liabilities measured at fair value	4,014	1,703
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage loan interest rate lock commitments [Member]
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage loan forward sales commitments [Member]
Derivative Asset
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed securities forward sales commitments [Member]
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Interest rate swaps [Member]
Derivative Asset	2,007	644
Assets and liabilities measured at fair value		95
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Interest rate swaps [Member] | Not Designated as Hedging Instrument [Member]
Securities available for sale	2,007	964
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Municipal securities [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | US government agencies [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed securities Agency [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Mortgage-backed securities Non-agency [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | Collateralized loan obligations [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Loans held for sale	39,473	35,292
Assets and liabilities measured at fair value	835,249	770,275
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage loan interest rate lock commitments [Member]
Derivative Asset	1,476	890
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage loan forward sales commitments [Member]
Derivative Asset	511	305
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed securities forward sales commitments [Member]
Derivative Liability	129	61
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Interest rate swaps [Member]
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Municipal securities [Member]
Securities available for sale	201,577	247,350
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | US government agencies [Member]
Securities available for sale	12,945	12,008
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed securities Agency [Member]
Securities available for sale	233,757	243,595
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Mortgage-backed securities Non-agency [Member]
Securities available for sale	165,884	95,125
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Collateralized loan obligations [Member]
Securities available for sale	172,508	128,643
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | Corporate securities [Member]
Securities available for sale	6,989	7,006
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Loans held for sale
Brokered deposits
Assets and liabilities measured at fair value	11,308	9,512
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage loan interest rate lock commitments [Member]
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage loan forward sales commitments [Member]
Derivative Asset
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed securities forward sales commitments [Member]
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Interest rate swaps [Member]
Derivative Asset
Derivative Liability
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Municipal securities [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | US government agencies [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed securities Agency [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Mortgage-backed securities Non-agency [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Collateralized loan obligations [Member]
Securities available for sale
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | Asset-backed securities [Member]
Securities available for sale	$ 11,308	$ 9,512

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - Nonrecurring basis [Member] - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Fair Value, Inputs, Level 1 [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | One-to-four family [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Commercial real estate [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Construction and development [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Consumer loans [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Commercial business loans [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Mortgage Receivables [Member] | One-to-four family [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Mortgage Receivables [Member] | Home equity [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Mortgage Receivables [Member] | Commercial real estate [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 1 [Member] | Mortgage Receivables [Member] | Construction and development [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | One-to-four family [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Commercial real estate [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Construction and development [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Consumer loans [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Commercial business loans [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Mortgage Receivables [Member] | One-to-four family [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Mortgage Receivables [Member] | Home equity [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Mortgage Receivables [Member] | Commercial real estate [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 2 [Member] | Mortgage Receivables [Member] | Construction and development [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 3 [Member]
Assets measured at fair value on a nonrecurring basis	41,769	38,235
Fair Value, Inputs, Level 3 [Member] | One-to-four family [Member]
Assets measured at fair value on a nonrecurring basis	433	709
Fair Value, Inputs, Level 3 [Member] | Commercial real estate [Member]
Assets measured at fair value on a nonrecurring basis
Fair Value, Inputs, Level 3 [Member] | Construction and development [Member]
Assets measured at fair value on a nonrecurring basis	1,293	2,397
Fair Value, Inputs, Level 3 [Member] | Consumer loans [Member]
Assets measured at fair value on a nonrecurring basis	19	26
Fair Value, Inputs, Level 3 [Member] | Commercial business loans [Member]
Assets measured at fair value on a nonrecurring basis	743	269
Fair Value, Inputs, Level 3 [Member] | Mortgage Servicing Rights [Member]
Assets measured at fair value on a nonrecurring basis	29,890	26,255
Fair Value, Inputs, Level 3 [Member] | Mortgage Receivables [Member] | One-to-four family [Member]
Assets measured at fair value on a nonrecurring basis	3,494	3,371
Fair Value, Inputs, Level 3 [Member] | Mortgage Receivables [Member] | Home equity [Member]
Assets measured at fair value on a nonrecurring basis	97	79
Fair Value, Inputs, Level 3 [Member] | Mortgage Receivables [Member] | Commercial real estate [Member]
Assets measured at fair value on a nonrecurring basis	4,494	4,811
Fair Value, Inputs, Level 3 [Member] | Mortgage Receivables [Member] | Construction and development [Member]
Assets measured at fair value on a nonrecurring basis	$ 1,306	$ 318

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - Fair Value, Inputs, Level 3 [Member]	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Mortgage Servicing Rights [Member]
Valuation Techniques	Discounted cash flows	Discounted cash flows
Significant Unobservable Inputs	Comparable sales	Comparable sales
Minimum [Member] | Mortgage Servicing Rights [Member]
Significant Unobservable Input Range	11.50%	11.50%
Assumptions Used to Estimate Fair Value, Prepayment Speed (As a percent)	6.00%	8.00%
Maximum [Member] | Mortgage Servicing Rights [Member]
Significant Unobservable Input Range	13.00%	13.00%
Assumptions Used to Estimate Fair Value, Prepayment Speed (As a percent)	8.50%	10.00%
Impaired Loans [Member]
Valuation Techniques	Appraisal Value	Appraisal Value
Significant Unobservable Inputs	Appraisals and or sales of comparable properties	Appraisals and or sales of comparable properties
Impaired Loans [Member] | Minimum [Member]
Significant Unobservable Input Range	10.00%	10.00%
Impaired Loans [Member] | Maximum [Member]
Significant Unobservable Input Range	20.00%	20.00%
Real estate owned [Member]
Valuation Techniques	Appraisal Value/ Comparison Sales/ Other estimates	Appraisal Value/ Comparison Sales/ Other estimates
Significant Unobservable Inputs	Appraisals and or sales of comparable properties	Appraisals and or sales of comparable properties
Real estate owned [Member] | Minimum [Member]
Significant Unobservable Input Range	10.00%	10.00%
Real estate owned [Member] | Maximum [Member]
Significant Unobservable Input Range	20.00%	20.00%

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017	Dec. 31, 2016
Financial assets:
Cash and due from banks	$ 27,327	$ 25,254
Interest-bearing cash	54,751	55,998
Securities available for sale	804,968	743,239
Federal Home Loan Bank stock	19,019	19,065
Other investments	3,429	3,446
Derivative assets	6,001	2,803
Loans held for sale	39,473	35,292
Loans receivable, net	2,414,234	2,308,050
Accrued interest receivable	12,664	11,992
Real estate acquired through foreclosure	1,726	3,106	$ 1,179
Mortgage servicing rights	23,626	21,003
Financial liabilities:
Deposits	2,708,798	2,604,929
Short-term borrowed funds	354,500	340,500
Long-term debt	46,347	72,259
Derivative liabilities	129	156
Drafts outstanding	10,454	7,324
Advances from borrowers for insurance and taxes	4,558	3,005
Accrued interest payable	1,560	1,126
Dividends payable to stockholders	1,354	1,051
Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and due from banks	27,327	25,254
Interest-bearing cash	54,751	55,998
Securities available for sale
Federal Home Loan Bank stock
Other investments
Derivative assets	4,014	1,608
Loans held for sale
Loans receivable, net
Accrued interest receivable
Real estate acquired through foreclosure
Mortgage servicing rights
Financial liabilities:
Deposits
Short-term borrowed funds
Long-term debt
Derivative liabilities		95
Drafts outstanding
Advances from borrowers for insurance and taxes
Accrued interest payable
Dividends payable to stockholders
Fair Value, Inputs, Level 2 [Member]
Financial assets:
Cash and due from banks
Interest-bearing cash
Securities available for sale	793,660	733,727
Federal Home Loan Bank stock
Other investments
Derivative assets	1,987	1,195
Loans held for sale	39,473	35,292
Loans receivable, net
Accrued interest receivable	12,664	11,992
Real estate acquired through foreclosure
Mortgage servicing rights
Financial liabilities:
Deposits	2,712,165	2,597,526
Short-term borrowed funds	354,595	339,870
Long-term debt	46,002	71,859
Derivative liabilities	129	61
Drafts outstanding	10,454	7,324
Advances from borrowers for insurance and taxes	4,558	3,005
Accrued interest payable	1,560	1,126
Dividends payable to stockholders	1,354	1,051
Fair Value, Inputs, Level 3 [Member]
Financial assets:
Cash and due from banks
Interest-bearing cash
Securities available for sale	11,308	9,512
Federal Home Loan Bank stock	19,019	19,065
Other investments	3,429	3,446
Derivative assets
Loans held for sale
Loans receivable, net	2,422,163	2,311,088
Accrued interest receivable
Real estate acquired through foreclosure	1,726	3,106
Mortgage servicing rights	29,890	26,255
Financial liabilities:
Deposits
Short-term borrowed funds
Long-term debt
Derivative liabilities
Drafts outstanding
Advances from borrowers for insurance and taxes
Accrued interest payable
Dividends payable to stockholders
Carrying Amount [Member]
Financial assets:
Cash and due from banks	27,327	25,254
Interest-bearing cash	54,751	55,998
Securities available for sale	804,968	743,239
Federal Home Loan Bank stock	19,019	19,065
Other investments	3,429	3,446
Derivative assets	6,001	2,803
Loans held for sale	39,473	35,292
Loans receivable, net	2,414,234	2,308,050
Accrued interest receivable	12,664	11,992
Real estate acquired through foreclosure	1,726	3,106
Mortgage servicing rights	23,626	21,003
Financial liabilities:
Deposits	2,708,798	2,604,929
Short-term borrowed funds	354,500	340,500
Long-term debt	46,347	72,259
Derivative liabilities	129	156
Drafts outstanding	10,454	7,324
Advances from borrowers for insurance and taxes	4,558	3,005
Accrued interest payable	1,560	1,126
Dividends payable to stockholders	1,354	1,051
Fair Value [Member]
Financial assets:
Cash and due from banks	27,327	25,254
Interest-bearing cash	54,751	55,998
Securities available for sale	804,968	743,239
Federal Home Loan Bank stock	19,019	19,065
Other investments	3,429	3,446
Derivative assets	6,001	2,803
Loans held for sale	39,473	35,292
Loans receivable, net	2,422,163	2,311,088
Accrued interest receivable	12,664	11,992
Real estate acquired through foreclosure	1,726	3,106
Mortgage servicing rights	29,890	26,255
Financial liabilities:
Deposits	2,712,165	2,597,526
Short-term borrowed funds	354,595	339,870
Long-term debt	46,002	71,859
Derivative liabilities	129	156
Drafts outstanding	10,454	7,324
Advances from borrowers for insurance and taxes	4,558	3,005
Accrued interest payable	1,560	1,126
Dividends payable to stockholders	$ 1,354	$ 1,051

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ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 5) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Commitments to Extend Credit [Member]
Off-Balance Sheet Financial Instruments:
Notional Amount	$ 378,608	$ 422,065
Estimated Fair Value
Standby Letters of Credit [Member]
Off-Balance Sheet Financial Instruments:
Notional Amount	14,329	4,449
Estimated Fair Value

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EARNINGS PER SHARE (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disclosure Earnings Per Share Details Abstract
Weighted average shares outstanding	21,243,094	16,029,332	20,961,182	14,980,349
Effect of dilutive securities	210,945	150,839	213,754	164,447
Average shares outstanding	21,454,039	16,180,171	21,174,936	15,144,796

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EARNINGS PER SHARE (Details 2) - shares	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Disclosure Earnings Per Share Details 2Abstract
Common stock, shares issued	22,570,182	21,022,202	16,156,943
Common stock, shares outstanding	22,570,182	21,022,202	16,156,943
Less nonvested restricted stock awards	(137,345)		(101,489)
Period end dilutive shares	20,921,144		16,055,454

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SUPPLEMENTAL SEGMENT INFORMATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Interest income	$ 39,477	$ 22,123	$ 77,154	$ 39,792
Interest expense	6,572	3,025	12,118	5,424
Net interest income (expense)	32,905	19,098	65,036	34,368
Provision for loan losses	559		559
Noninterest income from external customers	11,027	8,805	21,076	16,035
Intersegment noninterest income
Noninterest expense	24,371	15,890	61,970	31,476
Intersegment noninterest expense
Income (loss) before income taxes	19,002	12,013	23,583	18,927
Income tax expense (benefit)	4,036	2,673	4,561	4,684
Net income (loss)	14,966	9,340	19,022	14,243
Community Banking [Member]
Interest income	39,060	21,691	76,317	38,949
Interest expense	6,066	2,747	11,150	4,965
Net interest income (expense)	32,994	18,944	65,167	33,984
Provision for loan losses	534		534
Noninterest income from external customers	5,570	3,494	10,630	5,912
Intersegment noninterest income	242	242	483	483
Noninterest expense	19,348	11,448	52,278	22,772
Intersegment noninterest expense
Income (loss) before income taxes	18,924	11,232	23,468	17,607
Income tax expense (benefit)	3,996	2,789	4,556	4,656
Net income (loss)	14,928	8,443	18,912	12,951
Mortgage Banking [Member]
Interest income	458	427	889	822
Interest expense	77	42	130	54
Net interest income (expense)	381	385	759	768
Provision for loan losses	25		25
Noninterest income from external customers	5,434	5,311	10,358	10,123
Intersegment noninterest income	9	31	26	64
Noninterest expense	4,748	4,164	9,137	8,216
Intersegment noninterest expense	240	240	480	480
Income (loss) before income taxes	811	1,323	1,501	2,259
Income tax expense (benefit)	213	85	341	375
Net income (loss)	598	1,238	1,160	1,884
Other [Member]
Interest income	14	8	27	13
Interest expense	506	278	968	459
Net interest income (expense)	(492)	(270)	(941)	(446)
Provision for loan losses
Noninterest income from external customers	23		88
Intersegment noninterest income
Noninterest expense	275	278	554	488
Intersegment noninterest expense	2	2	3	3
Income (loss) before income taxes	(746)	(550)	(1,410)	(937)
Income tax expense (benefit)	(178)	(204)	(345)	(346)
Net income (loss)	(568)	(346)	(1,065)	(591)
Eliminations [Member]
Interest income	(55)	(3)	(79)	8
Interest expense	(77)	(42)	(130)	(54)
Net interest income (expense)	22	39	51	62
Provision for loan losses
Noninterest income from external customers
Intersegment noninterest income	(251)	(273)	(509)	(547)
Noninterest expense			1
Intersegment noninterest expense	(242)	(242)	(483)	(483)
Income (loss) before income taxes	13	8	24	(2)
Income tax expense (benefit)	5	3	9	(1)
Net income (loss)	$ 8	$ 5	$ 15	$ (1)

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SUPPLEMENTAL SEGMENT INFORMATION (Details 2) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Assets	$ 3,693,091	$ 3,519,017
Loans receivable, net	2,414,234	2,308,050
Loans held for sale	39,473	35,292
Deposits	2,708,798	2,604,929
Borrowed funds	400,847	412,759
Community Banking [Member]
Assets	3,690,507	3,516,551
Loans receivable, net	2,397,896	2,295,316
Loans held for sale	15,990	5,999
Deposits	2,718,920	2,611,106
Borrowed funds	368,500	380,500
Mortgage Banking [Member]
Assets	83,258	81,681
Loans receivable, net	31,385	28,206
Loans held for sale	23,483	29,293
Deposits
Borrowed funds	14,600	15,000
Other [Member]
Assets	584,455	503,144
Loans receivable, net
Loans held for sale
Deposits
Borrowed funds	32,347	32,259
Eliminations [Member]
Assets	(665,129)	(582,359)
Loans receivable, net	(15,047)	(15,472)
Loans held for sale
Deposits	(10,122)	(6,177)
Borrowed funds	$ (14,600)	$ (15,000)