NOTE 4: Loans

Major classifications of loans are summarized as follows:


	December 31,
(Dollars in thousands)	2018		2017
Real estate – residential mortgage	$	184,901	$	184,863
Real estate – construction 1		54,461		44,782
Commercial, financial and agricultural 2		455,935		437,884
Equity lines		55,660		55,237
Consumer		15,009		13,018
Consumer finance		296,154		292,004
		1,062,120		1,027,788
Less allowance for loan losses		(34,023)		(35,726)
Loans, net	$	1,028,097	$	992,062

Includes the Corporation’s real estate construction lending and consumer real estate lot lending.

Includes the Corporation’s commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending.

Consumer loans included $275,000 and $290,000 of demand deposit overdrafts at December 31, 2018 and 2017, respectively.

The outstanding principal balance and the carrying amount of loans acquired pursuant to the Corporation's acquisition of CVB on October 1, 2013 (or acquired loans) that were recorded at fair value at the acquisition date and are included in the Consolidated Balance Sheets are as follows:



	December 31, 2018						December 31, 2017
	Acquired Loans -		Acquired Loans -				Acquired Loans -		Acquired Loans -
	Purchased		Purchased		Acquired Loans -		Purchased		Purchased		Acquired Loans -
(Dollars in thousands)	Credit Impaired		Performing		Total		Credit Impaired		Performing		Total
Outstanding principal balance	$	9,734	$	38,768	$	48,502	$	12,856	$	45,083	$	57,939
Carrying amount
Real estate – residential mortgage	$	284	$	8,823	$	9,107	$	492	$	10,855	$	11,347
Commercial, financial and agricultural1		1,461		18,982		20,443		2,472		22,305		24,777
Equity lines		90		9,063		9,153		139		9,621		9,760
Consumer		—		6		6		—		12		12
Total acquired loans	$	1,835	$	36,874	$	38,709	$	3,103	$	42,793	$	45,896

Includes acquired loans classified by the Corporation as commercial real estate lending, land acquisition and development lending, builder line lending and commercial business lending.

The following table presents a summary of the change in the accretable yield of the PCI loan portfolio:


	Year Ended December 31,
(Dollars in thousands)	2018		2017
Accretable yield, balance at beginning of period	$	7,304	$	8,636
Accretion		(3,737)		(2,657)
Reclassification of nonaccretable difference due to improvement in expected cash flows		2,191		1,641
Other changes, net		229		(316)
Accretable yield, balance at end of period	$	5,987	$	7,304

Loans on nonaccrual status at December 31, 2018 and 2017 were as follows:


	December 31,
(Dollars in thousands)	2018		2017
Real estate – residential mortgage	$	594	$	830
Commercial, financial and agricultural:
Commercial real estate lending		—		3,796
Commercial business lending		24		34
Equity lines		883		651
Consumer finance		712		764
Total loans on nonaccrual status	$	2,213	$	6,075

If interest income had been recognized on nonaccrual loans at their stated rates during the years ended December 31, 2018, 2017 and 2016, interest income would have increased by approximately $325,000, $462,000 and $304,000, respectively.

The past due status of loans as of December 31, 2018 was as follows:


															90+ Days
	30 - 59 Days		60 - 89 Days		90+ Days		Total								Past Due and
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		PCI		Current1		Total Loans		Accruing
Real estate – residential mortgage	$	1,221	$	—	$	37	$	1,258	$	284	$	183,359	$	184,901	$	9
Real estate – construction:
Construction lending		—		—		—		—		—		42,051		42,051		—
Consumer lot lending		—		—		—		—		—		12,410		12,410		—
Commercial, financial and agricultural:
Commercial real estate lending		—		—		315		315		1,461		309,057		310,833		315
Land acquisition and development lending		—		—		—		—		—		43,404		43,404		—
Builder line lending		—		—		—		—		—		31,201		31,201		—
Commercial business lending		163		19		24		206		—		70,291		70,497		—
Equity lines		46		584		325		955		90		54,615		55,660		—
Consumer		31		—		—		31		—		14,978		15,009		—
Consumer finance		11,419		1,965		712		14,096		—		282,058		296,154		—
Total	$	12,880	$	2,568	$	1,413	$	16,861	$	1,835	$	1,043,424	$	1,062,120	$	324

For the purposes of the table above, “Current” includes loans that are 1-29 days past due.

The table above includes nonaccrual loans that are current of $458,000, 30-59 days past due of $97,000, 60‑89 days past due of $560,000 and 90+ days past due of $1.10 million.

The past due status of loans as of December 31, 2017 was as follows:


															90+ Days
	30 - 59 Days		60 - 89 Days		90+ Days		Total								Past Due and
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		PCI		Current1		Total Loans		Accruing
Real estate – residential mortgage	$	1,905	$	14	$	245	$	2,164	$	492	$	182,207	$	184,863	$	90
Real estate – construction:
Construction lending		—		—		—		—		—		41,449		41,449		—
Consumer lot lending		—		—		—		—		—		3,333		3,333		—
Commercial, financial and agricultural:
Commercial real estate lending		241		—		3,874		4,115		2,472		297,903		304,490		78
Land acquisition and development lending		—		—		—		—		—		39,844		39,844		—
Builder line lending		685		—		—		685		—		28,911		29,596		—
Commercial business lending		—		—		2		2		—		63,952		63,954		2
Equity lines		550		—		136		686		139		54,412		55,237		136
Consumer		9		—		—		9		—		13,009		13,018		—
Consumer finance		12,273		2,061		764		15,098		—		276,906		292,004		—
Total	$	15,663	$	2,075	$	5,021	$	22,759	$	3,103	$	1,001,926	$	1,027,788	$	306

For the purposes of the table above, “Current” includes loans that are 1-29 days past due.

The table above includes nonaccrual loans that are current of $890,000, 30-59 days past due of $458,000, 60‑89 days past due of $14,000 and 90+ days past due of $4.71 million.

Loan modifications that were classified as TDRs, and the recorded investment in those loans at the time of their modification, during the years ended December 31, 2018, 2017 and 2016 were as follows:


	Year Ended December 31,
	2018			2017			2016
	Number of	Recorded		Number of	Recorded		Number of	Recorded
(Dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Real estate – residential mortgage	1	$	140	2	$	365	5	$	1,136
Commercial, financial and agricultural:
Commercial real estate lending	—		—	7		6,800	3		227
Commercial business lending	—		—	—		—	2		125
Consumer	1		5	—		—	1		291
Total	2	$	145	9	$	7,165	11	$	1,779

One TDR during the year ended December 31, 2018, nine during the year ended December 31, 2017 and ten during the year ended December 31, 2016 included modifications of the loan’s interest rate. One TDR during the year ended December 31, 2018 included a modification of the loan’s payment structure. Three TDRs during the year ended December 31, 2017 and one during the year ended December 31, 2016 included a modification of the term of the loan.

All TDRs are considered impaired loans and are individually evaluated in the determination of the allowance for loan losses. A TDR payment default occurs when, within 12 months of the original TDR modification, either a full or partial charge-off occurs or a TDR becomes 90 days or more past due. The specific reserve associated with a TDR is reevaluated when a TDR payment default occurs. There were no TDR payment defaults during the year ended December 31, 2018. During the year ended December 31, 2017, TDR payment defaults occurred on three loans totaling $4.65 million that were part of a single commercial relationship and became more than 90 days past due.

Impaired loans, which included TDRs of $5.45 million, and the related allowance at December 31, 2018 were as follows:



			Recorded		Recorded
			Investment		Investment				Average
	Unpaid		in Loans		in Loans				Balance-		Interest
	Principal		without		with		Related		Impaired		Income
(Dollars in thousands)	Balance		Specific Reserve		Specific Reserve		Allowance		Loans		Recognized
Real estate – residential mortgage	$	3,057	$	1,288	$	1,677	$	92	$	3,056	$	142
Commercial, financial and agricultural:
Commercial real estate lending		2,468		1,498		927		10		2,653		132
Commercial business lending		33		25		—		—		26		—
Equity lines		365		31		326		326		359		2
Consumer		5		—		5		—		5		—
Total	$	5,928	$	2,842	$	2,935	$	428	$	6,099	$	276

Impaired loans, which consisted solely of TDRs, and the related allowance at December 31, 2017 were as follows:



			Recorded		Recorded
			Investment		Investment				Average
	Unpaid		in Loans		in Loans				Balance-		Interest
	Principal		without		with		Related		Impaired		Income
(Dollars in thousands)	Balance		Specific Reserve		Specific Reserve		Allowance		Loans		Recognized
Real estate – residential mortgage	$	3,745	$	1,603	$	2,033	$	214	$	3,743	$	184
Commercial, financial and agricultural:
Commercial real estate lending		6,981		2,841		4,031		615		7,818		168
Commercial business lending		41		35		—		—		45		—
Equity lines		32		31		—		—		32		2
Consumer		321		322		—		—		321		13
Total	$	11,120	$	4,832	$	6,064	$	829	$	11,959	$	367