Loans and Allowance for Loan Losses (Tables)

9 Months Ended

Sep. 30, 2018

Schedule of Accounts, Notes, Loans and Financing Receivable

At September 30, 2018 and December 31, 2017, loans are summarized as follows (in thousands):



	September 30, 2018									December 31, 2017
	PCI Loans¹			All Other Loans			Total			PCI Loans¹			All Other Loans			Total
Commercial real estate	$	17,632		$	748,454		$	766,086		$	17,903		$	625,085		$	642,988
Consumer real estate	5,799			344,623			350,422			7,450			286,007			293,457
Construction and land development	4,372			161,534			165,906			5,120			130,289			135,409
Commercial and industrial	762			289,022			289,784			858			237,229			238,087
Consumer and other	583			12,413			12,996			1,463			11,854			13,317
Total loans	29,148			1,556,046			1,585,194			32,794			1,290,464			1,323,258
Less: Allowance for loan losses	(19		)	(7,137		)	(7,156		)	(16		)	(5,844		)	(5,860		)
Loans, net	$	29,129		$	1,548,909		$	1,578,038		$	32,778		$	1,284,620		$	1,317,398

¹ Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase.

Schedule of Impaired and Performing Loans Receivable

The composition of loans by loan classification for impaired and performing loan status at September 30, 2018 and December 31, 2017, is summarized in the tables below (in thousands):



	September 30, 2018
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	747,256	$	343,265	$	160,987	$	288,603	$	12,345	$	1,552,456
Impaired loans	1,198		1,358		547		419		68		3,590
	748,454		344,623		161,534		289,022		12,413		1,556,046
PCI loans	17,632		5,799		4,372		762		583		29,148
Total	$	766,086	$	350,422	$	165,906	$	289,784	$	12,996	$	1,585,194



	December 31, 2017
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	624,638	$	284,585	$	129,742	$	237,016	$	11,842	$	1,287,823
Impaired loans	447		1,422		547		213		12		2,641
	625,085		286,007		130,289		237,229		11,854		1,290,464
PCI loans	17,903		7,450		5,120		858		1,463		32,794
Total loans	$	642,988	$	293,457	$	135,409	$	238,087	$	13,317	$	1,323,258

Schedule of Allowance for Loan Losses for Impaired and Performing Loans Receivable

The following tables show the allowance for loan losses allocation by loan classification for impaired, PCI, and performing loans as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	3,226	$	1,511	$	709	$	1,220	$	205	$	6,871
PCI loans	19		—		—		—		—		19
Impaired loans	—		87		—		142		37		266
Total	$	3,245	$	1,598	$	709	$	1,362	$	242	$	7,156



	December 31, 2017
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	2,444	$	1,340	$	521	$	890	$	204	$	5,399
PCI loans	16		—		—		—		—		16
Impaired loans	5		256		—		172		12		445
Total	$	2,465	$	1,596	$	521	$	1,062	$	216	$	5,860

Schedule of Financing Receivable Allowance for Credit Losses

The following tables detail the changes in the allowance for loan losses for the nine month period ending September 30, 2018 and year ending December 31, 2017, by loan classification (in thousands):



	September 30, 2018
	Commercial Real Estate			Consumer Real Estate			Construction and Land Development		Commercial and Industrial			Consumer and Other			Total
Beginning balance	$	2,465		$	1,596		$	521	$	1,062		$	216		$	5,860
Loans charged off	(38		)	(27		)	—		(178		)	(257		)	(500		)
Recoveries of loans charged off	—			55			7		65			62			189
Provision (reallocation) charged to expense	818			(26		)	181		413			221			1,607
Ending balance	$	3,245		$	1,598		$	709	$	1,362		$	242		$	7,156



	December 31, 2017
	Commercial Real Estate		Consumer Real Estate			Construction and Land Development			Commercial and Industrial			Consumer and Other			Total
Beginning balance	$	2,369	$	1,382		$	717		$	520		$	117		$	5,105
Loans charged off	—		(111		)	—			(24		)	(141		)	(276		)
Recoveries of charge-offs	8		99			13			67			61			248
Provision (reallocation) charged to expense	88		226			(209		)	499			179			783
Ending balance	$	2,465	$	1,596		$	521		$	1,062		$	216		$	5,860

Financing Receivable Credit Quality Indicators

The following tables outline the amount of each loan classification and the amount categorized into each risk rating as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018
Non PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	743,995	$	339,665	$	160,767	$	287,585	$	12,199	$	1,544,211
Watch	3,833		3,082		61		409		119		7,504
Special mention	—		546		159		632		—		1,337
Substandard	626		1,330		547		387		95		2,985
Doubtful	—		—		—		9		—		9
Total	$	748,454	$	344,623	$	161,534	$	289,022	$	12,413	$	1,556,046



PCI Loans
Pass	$	13,897	$	3,464	$	3,725	$	214	$	478	$	21,778
Watch	1,484		823		647		—		18		2,972
Special mention	1,379		241		—		119		13		1,752
Substandard	872		1,271		—		429		74		2,646
Doubtful	—		—		—		—		—		—
Total	$	17,632	$	5,799	$	4,372	$	762	$	583	$	29,148
Total loans	$	766,086	$	350,422	$	165,906	$	289,784	$	12,996	$	1,585,194



	December 31, 2017
Non PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	616,028	$	279,464	$	129,359	$	233,942	$	11,624	$	1,270,417
Watch	7,673		2,543		383		3,007		62		13,668
Special mention	1,006		2,627		—		64		155		3,852
Substandard	378		1,159		547		157		—		2,241
Doubtful	—		214		—		59		13		286
Total	$	625,085	$	286,007	$	130,289	$	237,229	$	11,854	$	1,290,464

Note 5. Loans and Allowance for Loan Losses, Continued

Credit Risk Management (continued):



PCI Loans
Pass	$	14,386	$	4,151	$	4,134	$	68	$	819	$	23,558
Watch	261		1,345		649		120		262		2,637
Special mention	—		456		—		58		24		538
Substandard	3,084		1,192		337		588		107		5,308
Doubtful	172		306		—		24		251		753
Total	$	17,903	$	7,450	$	5,120	$	858	$	1,463	$	32,794
Total loans	$	642,988	$	293,457	$	135,409	$	238,087	$	13,317	$	1,323,258

Past Due Financing Receivables

The following tables present the aging of the recorded investment in loans as of September 30, 2018 and December 31, 2017 (in thousands):



	September 30, 2018
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	341	$	222	$	301	$	—	$	864	$	17,632	$	747,590	$	766,086
Consumer real estate	1,071		10		—		936		2,017		5,799		342,606		350,422
Construction and land development	391		424		—		547		1,362		4,372		160,172		165,906
Commercial and industrial	96		314		487		311		1,208		762		287,814		289,784
Consumer and other	118		85		55		49		307		583		12,106		12,996
Total	$	2,017	$	1,055	$	843	$	1,843	$	5,758	$	29,148	$	1,550,288	$	1,585,194

Note 5. Loans and Allowance for Loan Losses, Continued

Past Due Loans (continued):



	December 31, 2017
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due and NonAccrual		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	517	$	—	$	728	$	128	$	1,373	$	17,903	$	623,712	$	642,988
Consumer real estate	769		194		33		991		1,987		7,450		284,020		293,457
Construction and land development	65		—		326		547		938		5,120		129,351		135,409
Commercial and industrial	86		200		131		85		502		858		236,727		238,087
Consumer and other	109		56		291		13		469		1,463		11,385		13,317
Total	$	1,546	$	450	$	1,509	$	1,764	$	5,269	$	32,794	$	1,285,195	$	1,323,258

Impaired Financing Receivables

The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded as of September 30, 2018 and December 31, 2017 (in thousands):



							For the nine months ended
	At September 30, 2018						September 30, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	1,198	$	1,211	$	—	$	802	$	27
Consumer real estate	981		992		—		769		22
Construction and land development	547		547		—		547		—
Commercial and industrial	72		73		—		62		5
Consumer and other	15		14		—		8		1
	2,813		2,837		—		2,188		55
Impaired loans with a valuation allowance:
Commercial real estate	—		—		—		6		—
Consumer real estate	376		388		87		576		13
Construction and land development	—		—		—		—		—
Commercial and industrial	348		354		142		280		10
Consumer and other	53		57		37		68		3
	777		799		266		930		26
PCI loans:
Commercial real estate	30		127		19		11		3
Total impaired loans	$	3,620	$	3,763	$	285	$	3,129	$	84

Note 5. Loans and Allowance for Loan Losses, Continued

Impaired Loans (continued):



							For the year ended
	At December 31, 2017						December 31, 2017
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	424	$	454	$	—	$	204	$	44
Consumer real estate	415		420		—		401		16
Construction and land development	547		547		—		628		—
Commercial and industrial	41		41		—		44		3
Consumer and other	—		—		—		—		—
	1,427		1,462		—		1,277		63
Impaired loans with a valuation allowance:
Commercial real estate	23		23		5		5		1
Consumer real estate	1,007		1,033		256		601		38
Construction and land development	—		—		—		—		—
Commercial and industrial	172		172		172		117		10
Consumer and other	12		13		12		2		1
	1,214		1,241		445		725		50
PCI loans:
Commercial real estate	16		123		16		3		16
Total impaired loans	$	2,657	$	2,826	$	461	$	2,005	$	129

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period, Carrying Amount of Loans

The Company has acquired loans which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of is as follows (in thousands):



	September 30, 2018			December 31, 2017
Commercial real estate	$	24,790		$	23,366
Consumer real estate	8,401			10,764
Construction and land development	5,473			6,285
Commercial and industrial	2,851			1,452
Consumer and other	892			1,710
Total loans	42,407			43,577
Less remaining purchase discount	(13,259		)	(10,783		)
Total loans, net of purchase discount	29,148			32,794
Less: Allowance for loan losses	(19		)	(16		)
Carrying amount, net of allowance	$	29,129		$	32,778

Schedule of Certain Loans Acquired in Transfer Accounted for as Debt Securities, Accretable Yield Movement

Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows for the three and nine months period ended September 30, 2018 and 2017 (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Accretable yield, beginning of period	$	7,206		$	8,475		$	9,287		$	8,950
Additions	—			—			1,292			—
Accretion income	(746		)	(1,061		)	(3,776		)	(2,731		)
Reclassification to accretable	2,516			134			2,898			743
Other changes, net	243			460			(482		)	1,046
Accretable yield	$	9,219		$	8,008		$	9,219		$	8,008

Schedule of Certain Loans Acquired Accounted For As Debt Securities Acquired During Period

Purchased credit impaired loans acquired from Southern Community Bank during the three and nine month period ended September 30, 2018 for which it was probable at acquisition that all contractually required payments would not be collected are as follows (in thousands):



	Three and Nine Months Ended September 30,
	2018
Contractual principal and interest at acquisition	$	15,133
Nonaccretable difference	5,302
Expected cash flows at acquisition	9,831
Accretable yield	1,292
Fair value of purchased credit impaired loans	$	8,539