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LOANS AND ALLOWANCE FOR LOAN LOSSES

12 Months Ended

Dec. 31, 2019

Loans

The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. During 2015 and 2016, the Bank purchased residential mortgage loan pools collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. These loans are reported as purchased loan pools on the consolidated balance sheets. During the third quarter of 2016, the Bank began purchasing from unrelated third parties consumer installment home improvement loans made to borrowers throughout the United States. As of December 31, 2019 and 2018, the net carrying value of these consumer installment home improvement loans was approximately $415.0 million and $399.9 million, respectively, and such loans are reported in the consumer installment loan category. During the fourth quarter of 2016, the Bank purchased a pool of commercial insurance premium finance loans made to borrowers throughout the United States and began a division to originate, administer and service these types of loans. As of December 31, 2019 and 2018, the net carrying value of commercial insurance premium finance loans was approximately $646.5 million and $413.5 million, respectively, and such loans are reported in the commercial, financial and agricultural loan category. The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio.

A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, commercial insurance premium finance and other business purposes. Commercial, financial and agricultural loans also include SBA loans and municipal loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans.

Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. The Company's residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages.

Consumer installment loans and other loans include home improvement loans, automobile loans, boat and recreational vehicle financing, and both secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default.

Loans are stated at unpaid balances, net of unearned income and deferred loan fees. Balances within the major loans receivable categories are presented in the following table, excluding purchased loans.


	December 31,
(dollars in thousands)	2019		2018
Commercial, financial and agricultural	$	1,646,438	$	1,316,359
Real estate – construction and development	1,083,564		671,198
Real estate – commercial and farmland	2,447,834		1,814,529
Real estate – residential	1,901,352		1,403,000
Consumer installment	450,799		455,371
	$	7,529,987	$	5,660,457

Purchased loans are defined as loans that were acquired in bank acquisitions including those that are covered by a loss-sharing agreement with the FDIC. Purchased loans totaling $5.08 billion and $2.59 billion at December 31, 2019 and 2018, respectively, are not included in the above schedule.

The carrying value of purchased loans are shown below according to major loan type as of the end of the years shown.


(dollars in thousands)	2019		2018
Commercial, financial and agricultural	$	384,273	$	372,686
Real estate – construction and development	465,497		227,900
Real estate – commercial and farmland	1,905,205		1,337,859
Real estate – residential	1,220,271		623,199
Consumer installment	1,100,035		27,188
	$	5,075,281	$	2,588,832

A rollforward of purchased loans for the years ended December 31, 2019 and 2018 is shown below.


(dollars in thousands)	2019		2018
Balance, January 1	$	2,588,832	$	861,595
Charge-offs	(5,275)		(1,803)
Additions due to acquisitions	3,511,645		2,053,744
Accretion	20,255		11,918
Purchase of acquired formerly serviced portfolio	103,530		—
Subsequent fair value adjustments recorded to goodwill	(4,854)		—
Loans sold	(109,611)		—
Transfers to loans held for sale	(8,293)		—
Transfers to purchased other real estate owned	(5,135)		(6,396)
Payments received	(1,015,798)		(330,226)
Other	(15)		—
Ending balance	$	5,075,281	$	2,588,832

The following is a summary of changes in the accretable discounts of purchased loans during years ended December 31, 2019 and 2018:


(dollars in thousands)	2019		2018
Balance, January 1	$	40,496	$	20,192
Additions due to acquisitions	38,116		30,037
Reduction due to purchase of acquired formerly serviced portfolio	(750)		—
Accretion	(20,255)		(11,918)
Accretable discounts removed due to charge-offs	—		(42)
Transfers between non-accretable and accretable discounts, net	1,678		2,227
Ending balance	$	59,285	$	40,496

Purchased loan pools are defined as groups of residential mortgage loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of December 31, 2019, purchased loan pools totaled $213.2 million and consisted of whole-loan, adjustable rate residential mortgages on properties outside the Company’s markets, with principal balances totaling $212.4

million and $811,000 of remaining purchase premium paid at acquisition. As of December 31, 2018, purchased loan pools totaled $262.6 million with principal balances totaling $260.5 million and $2.1 million of purchase premium paid at acquisition.

As of December 31, 2019, purchased loan pools included principal balance of $810,000 risk-rated 7 (Substandard), while all other loans in purchased loan pools were performing current loans risk-rated 3 (Good Credit). As of December 31, 2019, purchased pool loans had one loan on nonaccrual status with a principal balance of $810,000 and had no loans classified as troubled debt restructurings.

As of December 31, 2018, all loans in purchased loan pools were performing current loans risk-rated 3 (Good Credit). As of December 31, 2018, purchased pool loans had no loans on nonaccrual status and no loans classified as troubled debt restructurings.

At December 31, 2019 and 2018, the Company had allocated $624,000 and $732,000, respectively, of allowance for loan losses for the purchased loan pools.

As part of the due diligence process prior to purchasing an individual mortgage pool, a complete re-underwrite of the individual loan files was conducted. The underwriting process included a review of all income, asset, credit and property related documentation that was used to originate the loan. Underwriters utilized the originating lender’s program guidelines, as well as general prudent mortgage lending standards to assess each individual loan file. Additional research was conducted in order to assess the real estate market conditions and market expectations in the geographic areas where a collateral concentration existed. As part of this review, an automated valuation model was employed to provide current collateral valuations and to support individual loan-to-value ratios. Additionally, a sample of site inspections was completed to provide further assurance. The results of the due diligence review were evaluated by officers of the Company in order to determine overall conformance to the Bank’s credit and lending policies.

Nonaccrual and Past Due Loans

A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged to interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past due loans are loans whose principal or interest is past due 30 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms.

The following table presents an analysis of loans accounted for on a nonaccrual basis, excluding purchased loans.


(dollars in thousands)	2019		2018
Commercial, financial and agricultural	$	3,914	$	1,412
Real estate – construction and development	1,145		892
Real estate – commercial and farmland	4,232		4,654
Real estate – residential	19,557		10,465
Consumer installment	443		529
	$	29,291	$	17,952

The following table presents an analysis of purchased loans accounted for on a nonaccrual basis.


(dollars in thousands)	2019		2018
Commercial, financial and agricultural	$	5,933	$	1,199
Real estate – construction and development	842		6,119
Real estate – commercial and farmland	19,565		5,534
Real estate – residential	16,560		10,769
Consumer installment	2,123		486
	$	45,023	$	24,107

The following table presents an analysis of past due loans, excluding purchased loans as of December 31, 2019 and 2018.


(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
As of December 31, 2019
Commercial, financial and agricultural	$	16,323	$	9,925	$	7,167	$	33,415	$	1,613,023	$	1,646,438	$	4,811
Real estate – construction and development	6,054		1,222		994		8,270		1,075,294		1,083,564		—
Real estate – commercial and farmland	4,195		565		3,087		7,847		2,439,987		2,447,834		—
Real estate – residential	25,581		5,243		17,318		48,142		1,853,210		1,901,352		—
Consumer installment	2,752		1,301		1,260		5,313		445,486		450,799		922
Total	$	54,905	$	18,256	$	29,826	$	102,987	$	7,427,000	$	7,529,987	$	5,733


(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
As of December 31, 2018
Commercial, financial and agricultural	$	6,479	$	5,295	$	4,763	$	16,537	$	1,299,822	$	1,316,359	$	3,808
Real estate – construction and development	1,218		481		725		2,424		668,774		671,198		—
Real estate – commercial and farmland	1,625		530		3,645		5,800		1,808,729		1,814,529		—
Real estate – residential	11,423		4,631		8,923		24,977		1,378,023		1,403,000		—
Consumer installment	2,344		1,167		735		4,246		451,125		455,371		414
Total	$	23,089	$	12,104	$	18,791	$	53,984	$	5,606,473	$	5,660,457	$	4,222

The following table presents an analysis of purchased past due loans as of December 31, 2019 and 2018.


(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
As of December 31, 2019
Commercial, financial and agricultural	$	1,087	$	348	$	4,738	$	6,173	$	378,100	$	384,273	$	—
Real estate – construction and development	1,731		2		588		2,321		463,176		465,497		—
Real estate – commercial and farmland	3,209		2,840		12,511		18,560		1,886,645		1,905,205		—
Real estate – residential	20,645		8,685		12,956		42,286		1,177,985		1,220,271		—
Consumer installment	6,714		1,102		1,704		9,520		1,090,515		1,100,035		21
Total	$	33,386	$	12,977	$	32,497	$	78,860	$	4,996,421	$	5,075,281	$	21


(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 or More Days Past Due		Total Loans Past Due		Current Loans		Total Loans		Loans 90 Days or More Past Due and Still Accruing
As of December 31, 2018
Commercial, financial and agricultural	$	421	$	416	$	1,015	$	1,852	$	370,834	$	372,686	$	—
Real estate – construction and development	627		370		5,273		6,270		221,630		227,900		—
Real estate – commercial and farmland	1,935		736		1,698		4,369		1,333,490		1,337,859		—
Real estate – residential	12,531		2,407		7,005		21,943		601,256		623,199		—
Consumer installment	679		237		249		1,165		26,023		27,188		—
Total	$	16,193	$	4,166	$	15,240	$	35,599	$	2,553,233	$	2,588,832	$	—

Impaired Loans

Loans are considered impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreements. Impaired loans include loans on nonaccrual status and accruing troubled debt restructurings. When determining if the Company will be unable to collect all principal and interest payments due in accordance with the contractual terms of the loan agreement, the Company considers the borrower’s capacity to pay, which includes such factors as the borrower’s current financial statements, an analysis of global cash flow sufficient to pay all debt obligations and an evaluation of secondary sources of repayment, such as guarantor support and collateral value. The Company individually assesses for impairment all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000 (including all troubled debt restructurings, whether or not currently classified as such). The tables below include all loans deemed impaired, whether or not individually assessed for impairment. If a loan is deemed impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis.

The following is a summary of information pertaining to impaired loans, excluding purchased loans:


	As of and For the Years Ended December 31,
(dollars in thousands)	2019		2018		2017
Nonaccrual loans	$	29,291	$	17,952	$	14,202
Troubled debt restructurings not included above	11,646		9,323		13,599
Total impaired loans	$	40,937	$	27,275	$	27,801

Interest income recognized on impaired loans	$	1,023	$	827	$	1,867
Foregone interest income on impaired loans	$	882	$	853	$	950

The following table presents an analysis of information pertaining to impaired loans, excluding purchased loans as of December 31, 2019 and 2018.


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
As of December 31, 2019
Commercial, financial and agricultural	$	5,825	$	1,084	$	3,472	$	4,556	$	1,025	$	3,027
Real estate – construction and development	1,535		612		598		1,210		68		1,266
Real estate – commercial and farmland	7,586		627		6,344		6,971		392		6,682
Real estate – residential	28,122		5,315		22,434		27,749		1,695		21,270
Consumer installment	473		451		—		451		—		467
Total	$	43,541	$	8,089	$	32,848	$	40,937	$	3,180	$	32,712


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
As of December 31, 2018
Commercial, financial and agricultural	$	1,902	$	1,155	$	513	$	1,668	$	4	$	1,637
Real estate – construction and development	1,378		613		424		1,037		3		984
Real estate – commercial and farmland	8,950		867		6,649		7,516		1,591		7,879
Real estate – residential	16,885		5,144		11,365		16,509		867		15,029
Consumer installment	561		545		—		545		—		534
Total	$	29,676	$	8,324	$	18,951	$	27,275	$	2,465	$	26,063

The following is a summary of information pertaining to purchased impaired loans:


	As of and For the Years Ended December 31,
(dollars in thousands)	2019		2018		2017
Nonaccrual loans	$	45,023	$	24,107	$	15,428
Troubled debt restructurings not included above	17,963		18,740		20,472
Total impaired loans	$	62,986	$	42,847	$	35,900

Interest income recognized on impaired loans	$	3,108	$	2,203	$	1,625
Foregone interest income on impaired loans	$	3,218	$	1,483	$	1,239

The following table presents an analysis of information pertaining to purchased impaired loans as of December 31, 2019 and 2018.


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
As of December 31, 2019
Commercial, financial and agricultural	$	13,380	$	838	$	5,125	$	5,963	$	673	$	4,377
Real estate – construction and development	3,358		707		1,007		1,714		136		5,640
Real estate – commercial and farmland	34,929		11,520		12,037		23,557		561		19,126
Real estate – residential	33,744		8,098		21,531		29,629		1,897		38,572
Consumer installment	3,540		2,123		—		2,123		—		932
Total	$	88,951	$	23,286	$	39,700	$	62,986	$	3,267	$	68,647


(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
As of December 31, 2018
Commercial, financial and agricultural	$	5,717	$	473	$	757	$	1,230	$	—	$	836
Real estate – construction and development	13,714		623		6,511		7,134		476		5,712
Real estate – commercial and farmland	14,766		1,115		10,581		11,696		684		12,349
Real estate – residential	24,839		8,185		14,116		22,301		773		21,433
Consumer installment	526		486		—		486		—		229
Total	$	59,562	$	10,882	$	31,965	$	42,847	$	1,933	$	40,559

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades:

Grade 1 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 2 – Strong Credit – This grade includes loans that exhibit one or more characteristics better than that of a Good Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 3 – Good Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 4 – Satisfactory Credit – This grade includes loans which exhibit all the characteristics of a Good Credit, but warrant more than normal level of banker supervision due to (i) circumstances which elevate the risks of performance (such as start-up operations, untested management, heavy leverage and interim losses); (ii) adverse, extraordinary events that have affected, or could affect, the borrower’s cash flow, financial condition, ability to continue operating profitability or refinancing (such as

death of principal, fire and divorce); (iii) loans that require more than the normal servicing requirements (such as any type of construction financing, acquisition and development loans, accounts receivable or inventory loans and floor plan loans); (iv) existing technical exceptions which raise some doubts about the Bank’s perfection in its collateral position or the continued financial capacity of the borrower; or (v) improvements in formerly criticized borrowers, which may warrant banker supervision.

Grade 5 – Fair Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 6 – Other Assets Especially Mentioned – This grade includes loans that exhibit potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.

Grade 7 – Substandard – This grade represents loans which are inadequately protected by the current credit worthiness and paying capacity of the borrower or of the collateral pledged, if any. These assets exhibit a well-defined weakness or are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. These weaknesses may be characterized by past due performance, operating losses or questionable collateral values.

Grade 8 – Doubtful – This grade includes loans which exhibit all of the characteristics of a substandard loan with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable or improbable.

Grade 9 – Loss – This grade is assigned to loans which are considered uncollectible and of such little value that their continuance as active assets of the Bank is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing it off.

The following table presents the loan portfolio, excluding purchased loans, by risk grade as of December 31, 2019 and 2018 (in thousands).

As of December 31, 2019


Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
1 - Prime credit	$	497,942	$	—	$	208	$	27	$	11,807	$	509,984
2 - Strong credit	670,267		17,535		26,688		32,101		—		746,591
3 - Good credit	161,353		76,871		1,313,853		1,730,257		7,551		3,289,885
4 - Satisfactory credit	289,882		954,555		993,053		104,597		430,707		2,772,794
5 - Fair credit	19,450		24,415		67,047		8,077		30		119,019
6 - Other assets especially mentioned	1,952		7,786		20,268		2,540		120		32,666
7 - Substandard	5,592		2,402		26,717		23,753		574		59,038
8 - Doubtful	—		—		—		—		8		8
9 - Loss	—		—		—		—		2		2
Total	$	1,646,438	$	1,083,564	$	2,447,834	$	1,901,352	$	450,799	$	7,529,987

As of December 31, 2018


Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
1 - Prime credit	$	530,864	$	40	$	500	$	16	$	10,744	$	542,164
2 - Strong credit	452,250		681		37,079		33,043		48		523,101
3 - Good credit	174,811		74,657		888,433		1,246,383		23,844		2,408,128
4 - Satisfactory credit	137,038		582,456		814,068		94,143		419,983		2,047,688
5 - Fair credit	13,714		6,264		30,364		8,634		78		59,054
6 - Other assets especially mentioned	5,130		4,091		20,959		4,881		57		35,118
7 - Substandard	2,552		3,009		23,126		15,900		617		45,204
8 - Doubtful	—		—		—		—		—		—
9 - Loss	—		—		—		—		—		—
Total	$	1,316,359	$	671,198	$	1,814,529	$	1,403,000	$	455,371	$	5,660,457

The following table presents the purchased loan portfolio by risk grade as of December 31, 2019 and 2018 (in thousands).

As of December 31, 2019


Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
1 - Prime credit	$	76,516	$	—	$	—	$	—	$	1,377	$	77,893
2 - Strong credit	5,729		—		8,611		60,154		19,287		93,781
3 - Good credit	72,008		13,252		406,185		990,302		1,050,368		2,532,115
4 - Satisfactory credit	192,890		423,119		1,355,031		118,181		22,526		2,111,747
5 - Fair credit	13,867		17,343		66,072		16,541		178		114,001
6 - Other assets especially mentioned	2,950		9,437		33,674		7,592		93		53,746
7 - Substandard	20,313		2,346		35,632		27,501		6,206		91,998
8 - Doubtful	—		—		—		—		—		—
9 - Loss	—		—		—		—		—		—
Total	$	384,273	$	465,497	$	1,905,205	$	1,220,271	$	1,100,035	$	5,075,281

As of December 31, 2018


Risk Grade	Commercial, Financial and Agricultural		Real Estate - Construction and Development		Real Estate - Commercial and Farmland		Real Estate - Residential		Consumer Installment		Total
1 - Prime credit	$	90,205	$	—	$	—	$	—	$	570	$	90,775
2 - Strong credit	2,648		—		7,407		74,398		164		84,617
3 - Good credit	20,489		18,022		230,089		385,279		2,410		656,289
4 - Satisfactory credit	215,096		195,079		1,034,943		118,082		23,177		1,586,377
5 - Fair credit	14,445		2,728		29,468		16,937		35		63,613
6 - Other assets especially mentioned	11,601		1,459		10,063		7,231		94		30,448
7 - Substandard	18,202		10,612		25,889		21,272		738		76,713
8 - Doubtful	—		—		—		—		—		—
9 - Loss	—		—		—		—		—		—
Total	$	372,686	$	227,900	$	1,337,859	$	623,199	$	27,188	$	2,588,832

Troubled Debt Restructurings

The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms.

The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition.

The Company’s policy states in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time that the borrower has demonstrated the ability to service the loan payments based on the restructured terms – generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest, or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit Officer.

In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in 2019 and 2018 totaling $325.7 million and $111.7 million, respectively, under such parameters.

As of December 31, 2019 and 2018, the Company had a balance of $14.1 million and $11.0 million, respectively, in troubled debt restructurings, excluding purchased loans. The Company has recorded $827,000 and $890,000 in previous charge-offs on such loans at December 31, 2019 and 2018, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $1.8 million and $820,000 at December 31, 2019 and 2018, respectively. At December 31, 2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the year ending December 31, 2019 and 2018, the Company modified loans as troubled debt restructurings, excluding purchased loans, with principal balances of $4.8 million and $2.3 million, respectively, and these modifications did not have a material impact on the Company's allowance for loan losses. The following table presents the loans by class modified as troubled debt restructurings, excluding purchased loans, which occurred during the year ending December 31, 2019 and 2018.


	December 31, 2019				December 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	5	$	784	11	$	348
Real estate – construction and development	—	—		1	3
Real estate – commercial and farmland	2	220		2	440
Real estate – residential	20	3,751		13	1,430
Consumer installment	7	24		6	35
Total	34	$	4,779	33	$	2,256

Troubled debt restructurings, excluding purchased loans, with an outstanding balance of $1.9 million and $1.3 million at December 31, 2019 and 2018 defaulted during the year ended December 31, 2019 and 2018, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the year ending December 31, 2019 and 2018.


	December 31, 2019				December 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	4	$	81	8	$	107
Real estate – construction and development	1	2		1	—
Real estate – commercial and farmland	2	794		1	246
Real estate – residential	6	1,052		16	911
Consumer installment	4	17		7	34
Total	17	$	1,946	33	$	1,298

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased loans, classified separately as accrual and non-accrual at December 31, 2019 and 2018.


As of December 31, 2019	Accruing Loans				Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	5	$	642	14	$	312
Real estate – construction and development	2	64		1	1
Real estate – commercial and farmland	12	2,740		2	359
Real estate – residential	83	8,192		21	1,751
Consumer installment	4	8		21	59
Total	106	$	11,646	59	$	2,482


As of December 31, 2018	Accruing Loans				Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	5	$	256	14	$	138
Real estate – construction and development	5	145		1	2
Real estate – commercial and farmland	12	2,863		3	426
Real estate – residential	71	6,043		20	1,119
Consumer installment	6	16		24	69
Total	99	$	9,323	62	$	1,754

As of December 31, 2019 and 2018, the Company had a balance of $21.1 million and $22.2 million, respectively, in troubled debt restructurings included in purchased loans. The Company has recorded $1.1 million and $940,000, respectively, in previous charge-offs on such loans at December 31, 2019 and 2018. At December 31, 2019, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

During the year ending December 31, 2019 and 2018, the Company modified purchased loans as troubled debt restructurings, with principal balances of $3.7 million and $2.5 million, respectively, and these modifications did not have a material impact on the Company’s allowance for loan losses. The following table presents the purchased loans by class modified as troubled debt restructurings, which occurred during the year ending December 31, 2019 and 2018.


	December 31, 2019				December 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	—	$	—	4	$	63
Real estate – construction and development	—	—		—	—
Real estate – commercial and farmland	—	—		1	71
Real estate – residential	28	3,691		27	2,351
Consumer installment	3	34		2	14
Total	31	$	3,725	34	$	2,499

Troubled debt restructurings included in purchased loans with an outstanding balance of $2.2 million and $2.5 million defaulted during the years ended December 31, 2019 and 2018, respectively, and these defaults did not have a material impact on the Company’s allowance for loan loss. The following table presents the troubled debt restructurings by class that defaulted (defined as 30 days past due) during the year ending December 31, 2019 and 2018.


	December 31, 2019				December 31, 2018
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	2	$	6	—	$	—
Real estate – construction and development	—	—		—	—
Real estate – commercial and farmland	3	1,148		1	71
Real estate – residential	17	1,078		25	2,400
Consumer installment	1	15		—	—
Total	23	$	2,247	26	$	2,471

The following table presents the amount of troubled debt restructurings by loan class of purchased loans, classified separately as accrual and non-accrual at December 31, 2019 and 2018.


As of December 31, 2019	Accruing Loans				Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	30	3	$	23
Real estate – construction and development	4	872		2	252
Real estate – commercial and farmland	9	3,992		6	1,712
Real estate – residential	114	13,069		19	1,106
Consumer installment	—	—		6	48
Total	128	$	17,963	36	$	3,141


As of December 31, 2018	Accruing Loans				Non-Accruing Loans
Loan Class	#	Balance (in thousands)		#	Balance (in thousands)
Commercial, financial and agricultural	1	$	31	3	$	32
Real estate – construction and development	4	1,015		5	293
Real estate – commercial and farmland	12	6,162		7	1,685
Real estate – residential	115	11,532		24	1,424
Consumer installment	—	—		4	17
Total	132	$	18,740	43	$	3,451

As of December 31, 2019, there were no loans in purchased loan pools that had been modified as troubled debt restructurings. As of December 31, 2018, there were no loans in purchased loan pools that had been modified as a troubled debt restructurings.

Related Party Loans

In the ordinary course of business, the Company has granted loans to certain executive officers, directors and their affiliates. Changes in related party loans are summarized as follows:


	December 31,
(dollars in thousands)	2019		2018
Balance, January 1	$	1,458	$	2,145
Advances	6,799		257
Repayments	(2,537)		(944)
Transactions due to changes in related parties	27,960		—
Ending balance	$	33,680	$	1,458

Allowance for Loan Losses

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


(dollars in thousands)	Commercial, Financial and Agricultural		Real Estate – Construction and Development		Real Estate – Commercial and Farmland		Real Estate - Residential		Consumer Installment		Purchased Loans		Purchased Loan Pools		Total
Twelve months ended December 31, 2019
Balance, January 1, 2019	$	4,287	$	3,734	$	8,975	$	5,363	$	3,795	$	1,933	$	732	$	28,819
Provision for loan losses	6,699		2,421		1,446		3,108		4,774		1,418		(108)		19,758
Loans charged off	(7,131)		(321)		(1,430)		(160)		(5,695)		(5,051)		—		(19,788)
Recoveries of loans previously charged off	3,072		25		113		295		910		4,985		—		9,400
Balance, December 31, 2019	$	6,927	$	5,859	$	9,104	$	8,606	$	3,784	$	3,285	$	624	$	38,189

Period-end amount allocated to:
Loans individually evaluated for impairment⁽¹⁾	$	1,627	$	68	$	392	$	1,790	$	—	$	3,285	$	—	$	7,162
Loans collectively evaluated for impairment	5,300		5,791		8,712		6,816		3,784		—		624		31,027
Ending balance	$	6,927	$	5,859	$	9,104	$	8,606	$	3,784	$	3,285	$	624	$	38,189

Loans:
Individually evaluated for impairment⁽¹⁾	$	9,483	$	598	$	6,344	$	22,998	$	—	$	42,242	$	810	$	82,475
Collectively evaluated for impairment	1,636,955		1,082,966		2,441,490		1,878,354		450,799		4,899,116		212,398		12,602,078
Acquired with deteriorated credit quality	—		—		—		—		—		133,923		—		133,923
Ending balance	$	1,646,438	$	1,083,564	$	2,447,834	$	1,901,352	$	450,799	$	5,075,281	$	213,208	$	12,818,476

(1)At December 31, 2019, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.


(dollars in thousands)	Commercial, Financial and Agricultural		Real Estate – Construction and Development		Real Estate – Commercial and Farmland		Real Estate - Residential		Consumer Installment		Purchased Loans		Purchased Loan Pools		Total
Twelve months ended December 31, 2018
Balance, January 1, 2018	$	3,631	$	3,629	$	7,501	$	4,786	$	1,916	$	3,253	$	1,075	$	25,791
Provision for loan losses	10,690		277		1,636		1,002		5,569		(2,164)		(343)		16,667
Loans charged off	(13,803)		(292)		(338)		(771)		(4,189)		(1,738)		—		(21,131)
Recoveries of loans previously charged off	3,769		120		176		346		499		2,582		—		7,492
Balance, December 31, 2018	$	4,287	$	3,734	$	8,975	$	5,363	$	3,795	$	1,933	$	732	$	28,819

Period-end amount allocated to:
Loans individually evaluated for impairment⁽¹⁾	$	570	$	3	$	1,591	$	867	$	—	$	1,933	$	—	$	4,964
Loans collectively evaluated for impairment	3,717		3,731		7,384		4,496		3,795		—		732		23,855
Ending balance	$	4,287	$	3,734	$	8,975	$	5,363	$	3,795	$	1,933	$	732	$	28,819

Loans:
Individually evaluated for impairment⁽¹⁾	$	3,211	$	424	$	6,649	$	11,364	$	—	$	32,244	$	—	$	53,892
Collectively evaluated for impairment	1,313,148		670,774		1,807,880		1,391,636		455,371		2,468,996		262,625		8,370,430
Acquired with deteriorated credit quality	—		—		—		—		—		87,592		—		87,592
Ending balance	$	1,316,359	$	671,198	$	1,814,529	$	1,403,000	$	455,371	$	2,588,832	$	262,625	$	8,511,914

(1)At December 31, 2018, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.


(dollars in thousands)	Commercial, Financial and Agricultural		Real Estate – Construction and Development		Real Estate – Commercial and Farmland		Real Estate - Residential		Consumer Installment		Purchased Loans		Purchased Loan Pools		Total
Twelve months ended December 31, 2017
Balance, January 1, 2017	$	2,192	$	2,990	$	7,662	$	6,786	$	827	$	1,626	$	1,837	$	23,920
Provision for loan losses	3,019		488		508		(86)		2,591		2,606		(762)		8,364
Loans charged off	(2,850)		(95)		(853)		(2,151)		(1,618)		(2,900)		—		(10,467)
Recoveries of loans previously charged off	1,270		246		184		237		116		1,921		—		3,974
Balance, December 31, 2017	$	3,631	$	3,629	$	7,501	$	4,786	$	1,916	$	3,253	$	1,075	$	25,791

Period-end amount allocated to:
Loans individually evaluated for impairment⁽¹⁾	$	465	$	48	$	1,047	$	1,028	$	—	$	3,253	$	177	$	6,018
Loans collectively evaluated for impairment	3,166		3,581		6,454		3,758		1,916		—		898		19,773
Ending balance	$	3,631	$	3,629	$	7,501	$	4,786	$	1,916	$	3,253	$	1,075	$	25,791

Loans:
Individually evaluated for impairment⁽¹⁾	$	2,971	$	500	$	8,873	$	10,818	$	—	$	28,165	$	904	$	52,231
Collectively evaluated for impairment	1,359,537		624,095		1,526,566		998,643		324,511		718,447		327,342		5,879,141
Acquired with deteriorated credit quality	—		—		—		—		—		114,983		—		114,983
Ending balance	$	1,362,508	$	624,595	$	1,535,439	$	1,009,461	$	324,511	$	861,595	$	328,246	$	6,046,355

(1)At December 31, 2017, loans individually evaluated for impairment includes all nonaccrual loans greater than $100,000 and all troubled debt restructurings greater than $100,000, including all troubled debt restructurings and not only those currently classified as troubled debt restructurings.