NOTE 4 – LOANS

The Company 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. Ameris 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.

Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Company 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, construction of one-to-four family 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.

Consumer installment loans and other loans include 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 non-covered and covered loans:


(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Commercial, financial and agricultural	$	304,588	$	244,373	$	208,424
Real estate – construction and development		149,346		146,371		134,607
Real estate – commercial and farmland		850,000		808,323		788,654
Real estate – residential		422,731		366,882		357,685
Consumer installment		31,902		34,249		36,923
Other		11,492		18,256		29,534

	$	1,770,059	$	1,618,454	$	1,555,827

Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the FDIC. Purchased non-covered loans totaling $702.1 million and $448.8 million at June 30, 2014 and December 31, 2013, respectively, are not included in the above schedule. There were no purchased non-covered loans at June 30, 2013.

Purchased non-covered loans are shown below according to major loan type as of the end of the periods shown:


(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Commercial, financial and agricultural	$	41,583	$	32,141	$	—
Real estate – construction and development		64,084		31,176		—
Real estate – commercial and farmland		311,748		179,898		—
Real estate – residential		278,451		200,851		—
Consumer installment		6,265		4,687		—

	$	702,131	$	448,753	$	—

Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $331.3 million, $390.2 million and $443.5 million at June 30, 2014, December 31, 2013 and June 30, 2013, respectively, are not included in the above schedule.

Covered loans are shown below according to loan type as of the end of the periods shown:


(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Commercial, financial and agricultural	$	25,209	$	26,550	$	27,371
Real estate – construction and development		31,600		43,179		52,972
Real estate – commercial and farmland		188,643		224,451		255,102
Real estate – residential		85,518		95,173		107,107
Consumer installment		280		884		965

	$	331,250	$	390,237	$	443,517

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 against interest income. Interest payments on nonaccrual 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. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans are loans whose principal or interest is past due 90 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 non-covered and covered loans:


(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Commercial, financial and agricultural	$	1,596	$	4,103	$	4,326
Real estate – construction and development		3,452		3,971		5,448
Real estate – commercial and farmland		8,831		8,566		8,963
Real estate – residential		7,795		12,152		12,423
Consumer installment		437		411		651

	$	22,111	$	29,203	$	31,811

The following table presents an analysis of purchased non-covered loans accounted for on a nonaccrual basis:


(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Commercial, financial and agricultural	$	143	$	11	$	—
Real estate – construction and development		2,273		325		—
Real estate – commercial and farmland		6,647		1,653		—
Real estate – residential		6,658		4,658		—
Consumer installment		49		12		—

	$	15,770	$	6,659	$	—

The following table presents an analysis of covered loans accounted for on a nonaccrual basis:


(Dollars in Thousands)	June 30, 2014		December 31, 2013		June 30, 2013
Commercial, financial and agricultural	$	12,254	$	7,257	$	8,729
Real estate – construction and development		8,028		14,781		17,039
Real estate – commercial and farmland		17,027		33,495		47,427
Real estate – residential		8,702		13,278		15,459
Consumer installment		127		341		285

	$	46,138	$	69,152	$	88,939

The following table presents an aging analysis of loans, excluding purchased non-covered and covered past due loans as of June 30, 2014, December 31, 2013 and June 30, 2013:


	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
	(Dollars in Thousands)
As of June 30, 2014:
Commercial, financial & agricultural	$	1,180	$	966	$	1,077	$	3,223	$	301,365	$	304,588	$	—
Real estate – construction & development		3,942		296		3,449		7,687		141,659		149,346		—
Real estate – commercial & farmland		4,622		1,860		7,404		13,886		836,114		850,000		—
Real estate – residential		5,806		3,829		7,197		16,832		405,899		422,731		—
Consumer installment loans		345		176		310		831		31,071		31,902		—
Other		—		—		—		—		11,492		11,492		—

Total	$	15,895	$	7,127	$	19,437	$	42,459	$	1,727,600	$	1,770,059	$	—


	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
	(Dollars in Thousands)
As of December 31, 2013:
Commercial, financial & agricultural	$	10,893	$	272	$	4,081	$	15,246	$	229,127	$	244,373	$	—
Real estate – construction & development		1,026		69		3,935		5,030		141,341		146,371		—
Real estate – commercial & farmland		3,981		1,388		7,751		13,120		795,203		808,323		—
Real estate – residential		5,422		1,735		11,587		18,744		348,138		366,882		—
Consumer installment loans		568		197		305		1,070		33,179		34,249		—
Other		—		—		—		—		18,256		18,256		—

Total	$	21,890	$	3,661	$	27,659	$	53,210	$	1,565,244	$	1,618,454	$	—


	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
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	1,449	$	502	$	4,013	$	5,964	$	202,460	$	208,424	$	—
Real estate – construction & development		1,638		104		5,418		7,160		127,447		134,607		—
Real estate – commercial & farmland		5,392		1,580		5,333		12,305		776,349		788,654		—
Real estate – residential		4,735		5,256		11,745		21,736		335,949		357,685		—
Consumer installment loans		432		175		548		1,155		35,768		36,923		—
Other		—		—		—		—		29,534		29,534		—

Total	$	13,646	$	7,617	$	27,057	$	48,320	$	1,507,507	$	1,555,827	$	—

The following table presents an aging analysis of purchased non-covered past due loans based on the recorded basis as of June 30, 2014 and December 31, 2013. There were no purchased non-covered loans as of June 30, 2013:


	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
	(Dollars in Thousands)
As of June 30, 2014:
Commercial, financial & agricultural	$	137	$	26	$	143	$	306	$	41,277	$	41,583	$	—
Real estate – construction & development		712		168		2,165		3,045		61,039		64,084		—
Real estate – commercial & farmland		1,263		1,605		6,647		9,515		302,233		311,748		—
Real estate – residential		6,952		983		6,144		14,079		264,372		278,451		—
Consumer installment loans		23		29		47		99		6,166		6,265		—

Total	$	9,087	$	2,811	$	15,146	$	27,044	$	675,087	$	702,131	$	—


	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
	(Dollars in Thousands)
As of December 31, 2013:
Commercial, financial & agricultural	$	370	$	70	$	11	$	451	$	31,690	$	32,141	$	—
Real estate – construction & development		1,008		89		325		1,422		29,754		31,176		—
Real estate – commercial & farmland		6,851		2,064		1,516		10,431		169,467		179,898		—
Real estate – residential		4,667		1,074		3,428		9,169		191,682		200,851		—
Consumer installment loans		7		17		9		33		4,654		4,687		—

Total	$	12,903	$	3,314	$	5,289	$	21,506	$	427,247	$	448,753	$	—

The following table presents an aging analysis of covered loans as of June 30, 2014, December 31, 2013 and June 30, 2013:


	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
	(Dollars in Thousands)
As of June 30, 2014:
Commercial, financial & agricultural	$	16	$	467	$	6,909	$	7,392	$	17,817	$	25,209	$	—
Real estate – construction & development		551		459		7,708		8,718		22,882		31,600		—
Real estate – commercial & farmland		6,399		139		10,443		16,981		171,662		188,643		—
Real estate – residential		2,490		690		5,939		9,119		76,399		85,518		—
Consumer installment loans		—		49		56		105		175		280		—

Total	$	9,456	$	1,804	$	31,055	$	42,315	$	288,935	$	331,250	$	—


	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
	(Dollars in Thousands)
As of December 31, 2013:
Commercial, financial & agricultural	$	3,966	$	12	$	6,165	$	10,143	$	16,407	$	26,550	$	—
Real estate – construction & development		843		144		14,055		15,042		28,137		43,179		—
Real estate – commercial & farmland		8,482		4,350		26,428		39,260		185,191		224,451		346
Real estate – residential		7,648		1,914		10,244		19,806		75,367		95,173		—
Consumer installment loans		51		14		305		370		514		884		—

Total	$	20,990	$	6,434	$	57,197	$	84,621	$	305,616	$	390,237	$	346


	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
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	529	$	441	$	7,333	$	8,303	$	19,068	$	27,371	$	63
Real estate – construction & development		2,672		743		15,911		19,326		33,646		52,972		348
Real estate – commercial & farmland		4,020		3,929		41,250		49,199		205,903		255,102		636
Real estate – residential		6,283		772		12,155		19,210		87,897		107,107		60
Consumer installment loans		68		6		255		329		636		965		—

Total	$	13,572	$	5,891	$	76,904	$	96,367	$	347,150	$	443,517	$	1,107

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. 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. Impaired loans include loans on nonaccrual status and troubled debt restructurings. The Company individually assesses for impairment all nonaccrual loans greater than $200,000 and rated substandard or worse and all troubled debt restructurings greater than $100,000. 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 non-covered and covered loans:


	As of and For the Period Ended
	June 30, 2014		December 31, 2013		June 30, 2013
	(Dollars in Thousands)
Nonaccrual loans	$	22,111	$	29,203	$	31,811
Troubled debt restructurings not included above		17,337		17,214		18,015

Total impaired loans	$	39,448	$	46,417	$	49,826

Impaired loans not requiring a related allowance	$	—	$	—	$	—

Impaired loans requiring a related allowance	$	39,448	$	46,417	$	49,826

Allowance related to impaired loans	$	3,619	$	3,871	$	5,072

Average investment in impaired loans	$	43,814	$	51,721	$	54,481

Interest income recognized on impaired loans	$	42	$	522	$	451

Foregone interest income on impaired loans	$	23	$	418	$	172

The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of June 30, 2014, December 31, 2013 and June 30, 2013.


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2014:
Commercial, financial & agricultural	$	3,398	$	—	$	1,852	$	1,852	$	298	$	3,397
Real estate – construction & development		9,336		—		5,532		5,532		798		5,811
Real estate – commercial & farmland		19,215		—		16,421		16,421		1,629		16,394
Real estate – residential		18,313		—		15,131		15,131		884		17,698
Consumer installment loans		638		—		512		512		10		514

Total	$	50,900	$	—	$	39,448	$	39,448	$	3,619	$	43,814


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2013:
Commercial, financial & agricultural	$	6,240	$	—	$	4,618	$	4,618	$	435	$	4,844
Real estate – construction & development		11,363		—		5,867		5,867		512		8,341
Real estate – commercial & farmland		18,456		—		15,479		15,479		1,443		17,559
Real estate – residential		24,342		—		19,970		19,970		1,472		20,335
Consumer installment loans		623		—		483		483		9		642

Total	$	61,024	$	—	$	46,417	$	46,417	$	3,871	$	51,721


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	7,723	$	—	$	5,384	$	5,384	$	1,018	$	4,960
Real estate – construction & development		15,324		—		7,394		7,394		687		9,894
Real estate – commercial & farmland		19,759		—		16,491		16,491		1,657		18,692
Real estate – residential		23,373		—		19,893		19,893		1,692		20,178
Consumer installment loans		808		—		664		664		18		757

Total	$	66,987	$	—	$	49,826	$	49,826	$	5,072	$	54,481

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


	As of and For the Period Ended
	June 30, 2014		December 31, 2013		June 30, 2013
	(Dollars in Thousands)
Nonaccrual loans	$	15,770	$	6,659	$	—
Troubled debt restructurings not included above		—		—		—

Total impaired loans	$	15,770	$	6,659	$	—

Impaired loans not requiring a related allowance	$	15,770	$	6,659	$	—

Impaired loans requiring a related allowance	$	—	$	—	$	—

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	12,582	$	128	$	—

Interest income recognized on impaired loans	$	16	$	—	$	—

Foregone interest income on impaired loans	$	158	$	—	$	—

The following table presents an analysis of information pertaining to impaired purchased non-covered loans as of June 30, 2014 and December 31, 2013. There were no purchased non-covered loans as of June 30, 2013:


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2014:
Commercial, financial & agricultural	$	550	$	143	$	—	$	143	$	—	$	90
Real estate – construction & development		4,649		2,273		—		2,273		—		1,243
Real estate – commercial & farmland		9,848		6,647		—		6,647		—		5,043
Real estate – residential		10,598		6,658		—		6,658		—		6,175
Consumer installment loans		65		49		—		49		—		31

Total	$	25,710	$	15,770	$	—	$	15,770	$	—	$	12,582


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2013:
Commercial, financial & agricultural	$	19	$	11	$	—	$	11	$	—	$	—
Real estate – construction & development		542		325		—		325		—		6
Real estate – commercial & farmland		2,673		1,653		—		1,653		—		32
Real estate – residential		7,712		4,658		—		4,658		—		90
Consumer installment loans		20		12		—		12		—		—

Total	$	10,996	$	6,659	$	—	$	6,659	$	—	$	128

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


	As of and For the Period Ended
	June 30, 2014		December 31, 2013		June 30, 2013
	(Dollars in Thousands)
Nonaccrual loans	$	46,138	$	69,152	$	88,939
Troubled debt restructurings not included above		9,221		8,409		10,253

Total impaired loans	$	55,359	$	77,561	$	99,192

Impaired loans not requiring a related allowance	$	55,359	$	77,561	$	99,192

Impaired loans requiring a related allowance	$	—	$	—	$	—

Allowance related to impaired loans	$	—	$	—	$	—

Average investment in impaired loans	$	70,932	$	94,873	$	104,473

Interest income recognized on impaired loans	$	214	$	968	$	784

Foregone interest income on impaired loans	$	94	$	330	$	242

The following table presents an analysis of information pertaining to impaired covered loans as of June 30, 2014, December 31, 2013 and June 30, 2013:


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2014:
Commercial, financial & agricultural	$	14,617	$	12,254	$	—	$	12,254	$	—	$	10,525
Real estate – construction & development		9,780		8,028		—		8,028		—		13,380
Real estate – commercial & farmland		21,236		18,093		—		18,093		—		27,174
Real estate – residential		18,662		16,857		—		16,857		—		19,641
Consumer installment loans		161		127		—		127		—		212

Total	$	64,456	$	55,359	$	—	$	55,359	$	—	$	70,932


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of December 31, 2013:
Commercial, financial & agricultural	$	9,598	$	7,257	$	—	$	7,257	$	—	$	8,676
Real estate – construction & development		17,540		14,781		—		14,781		—		17,909
Real estate – commercial & farmland		39,056		34,074		—		34,074		—		44,652
Real estate – residential		24,819		21,108		—		21,108		—		23,332
Consumer installment loans		394		341		—		341		—		304

Total	$	91,407	$	77,561	$	—	$	77,561	$	—	$	94,873


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
	(Dollars in Thousands)
As of June 30, 2013:
Commercial, financial & agricultural	$	12,151	$	8,769	$	—	$	8,769	$	—	$	9,417
Real estate – construction & development		24,044		19,198		—		19,198		—		19,394
Real estate – commercial & farmland		58,538		48,000		—		48,000		—		50,508
Real estate – residential		27,794		22,940		—		22,940		—		24,877
Consumer installment loans		340		285		—		285		—		277

Total	$	122,867	$	99,192	$	—	$	99,192	$	—	$	104,473

Credit Quality Indicators

The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. Every loan is assigned a risk rating, with the exception of credit card receivables and overdraft protection loans which are treated as pools for risk rating purposes. Relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department or an independent third party loan review firm. The following is a description of the general characteristics of the grades:

Grade 10 – Prime Credit – This grade represents loans to the Company’s most creditworthy borrowers or loans that are secured by cash or cash equivalents.

Grade 15 – Good Credit – This grade includes loans that exhibit one or more characteristics better than that of a Satisfactory Credit. Generally, the debt service coverage and borrower’s liquidity is materially better than required by the Company’s loan policy.

Grade 20 – Satisfactory Credit – This grade is assigned to loans to borrowers who exhibit satisfactory credit histories, contain acceptable loan structures and demonstrate ability to repay.

Grade 23 – Performing, Under-Collateralized Credit – This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibit a loan-to-value ratio greater than 110%, based on a documented collateral valuation.

Grade 25 – Minimum Acceptable Credit – This grade includes loans which exhibit all the characteristics of a Satisfactory 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 30 – Other Asset 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 40 – Substandard – This grade represents loans which are inadequately protected by the current sound worth 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 50 – 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 60 – 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 loss 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 non-covered and covered loans, by risk grade as of June 30, 2014.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	103,726	$	—	$	255	$	505	$	6,356	$	—	$	110,842
15		24,620		4,678		141,846		54,388		1,120		—		226,652
20		102,278		48,008		460,715		226,149		17,714		11,492		866,356
23		123		9,215		9,318		9,479		294		—		28,429
25		65,882		77,973		197,381		103,846		5,281		—		450,363
30		4,004		2,680		12,914		13,568		194		—		33,360
40		3,955		6,792		27,571		14,786		943		—		54,047
50		—		—		—		10		—		—		10
60		—		—		—		—		—		—		—

Total	$	304,588	$	149,346	$	850,000	$	422,731	$	31,902	$	11,492	$	1,770,059

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 31, 2013.


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	66,983	$	—	$	265	$	419	$	6,714	$	—	$	74,381
15		24,789		4,655		147,157		52,335		1,276		—		230,212
20		93,852		45,195		431,790		165,339		18,619		18,256		773,051
23		127		8,343		10,219		12,641		274		—		31,604
25		50,373		78,736		181,645		103,427		6,310		—		420,491
30		2,111		2,876		11,849		13,558		197		—		30,591
40		6,011		6,566		25,398		19,153		859		—		57,987
50		127		—		—		10		—		—		137
60		—		—		—		—		—		—		—

Total	$	244,373	$	146,371	$	808,323	$	366,882	$	34,249	$	18,256	$	1,618,454

The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of June 30, 2013:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	37,173	$	—	$	298	$	498	$	6,883	$	—	$	44,852
15		17,783		4,934		154,369		63,078		1,527		—		241,691
20		82,636		36,654		402,677		137,518		19,586		29,534		708,605
23		108		6,878		9,575		13,104		165		—		29,830
25		60,981		75,273		189,109		110,244		7,497		—		443,104
30		3,154		3,183		12,104		10,666		159		—		29,266
40		5,991		7,685		20,522		22,577		1,104		—		57,879
50		598		—		—		—		—		—		598
60		—		—		—		—		2		—		2

Total	$	208,424	$	134,607	$	788,654	$	357,685	$	36,923	$	29,534	$	1,555,827

The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2014:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	3,494	$	—	$	—	$	293	$	557	$	—	$	4,344
15		4,728		245		14,191		15,839		537		—		35,540
20		11,567		12,905		94,598		64,937		2,683		—		186,690
23		—		—		—		165		—		—		165
25		18,251		42,127		175,427		178,523		2,343		—		416,671
30		3,162		4,722		16,078		8,326		21		—		32,309
40		381		4,085		11,454		10,368		124		—		26,412
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	41,583	$	64,084	$	311,748	$	278,451	$	6,265	$	—	$	702,131

The following table presents the purchased non-covered loan portfolio by risk grade as of December 31, 2013:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	1,865	$	—	$	—	$	289	$	451	$	—	$	2,605
15		4,606		7		12,998		16,160		703		—		34,474
20		5,172		3,960		43,802		34,576		1,383		—		88,893
23		—		—		—		—		—		—		—
25		19,638		20,733		102,260		129,923		1,888		—		274,442
30		576		1,760		9,554		10,878		194		—		22,962
40		284		4,716		11,284		9,025		68		—		25,377
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	32,141	$	31,176	$	179,898	$	200,851	$	4,687	$	—	$	448,753

There were no purchased non-covered loans as of June 30, 2013.

The following table presents the covered loan portfolio by risk grade as of June 30, 2014:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		2		822		629		—		—		1,453
20		1,133		5,524		33,050		17,143		68		—		56,918
23		124		555		15,528		5,557		—		—		21,764
25		6,569		9,251		94,504		36,507		40		—		146,871
30		4,398		4,802		9,959		8,326		2		—		27,487
40		12,985		11,466		34,780		17,356		170		—		76,757
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	25,209	$	31,600	$	188,643	$	85,518	$	280	$	—	$	331,250

The following table presents the covered loan portfolio by risk grade as of December 31, 2013:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		16		1,048		638		—		—		1,702
20		2,184		8,549		34,674		21,363		193		—		66,963
23		134		1,085		17,037		4,748		51		—		23,055
25		7,508		9,611		101,657		38,427		235		—		157,438
30		5,125		2,006		21,297		6,979		17		—		35,424
40		11,599		21,912		48,738		23,018		388		—		105,655
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	26,550	$	43,179	$	224,451	$	95,173	$	884	$	—	$	390,237

The following table presents the covered loan portfolio by risk grade as of June 30, 2013:


Risk Grade	Commercial, financial & agricultural		Real estate - construction & development		Real estate - commercial & farmland		Real estate - residential		Consumer installment loans		Other		Total
	(Dollars in Thousands)
10	$	—	$	—	$	—	$	—	$	—	$	—	$	—
15		—		27		1,571		634		—		—		2,232
20		2,815		10,533		36,360		25,277		231		—		75,216
23		69		1,666		11,323		2,671		—		—		15,729
25		8,469		11,574		118,867		41,408		348		—		180,666
30		1,999		3,505		26,144		9,175		25		—		40,848
40		14,019		25,667		60,837		27,942		361		—		128,826
50		—		—		—		—		—		—		—
60		—		—		—		—		—		—		—

Total	$	27,371	$	52,972	$	255,102	$	107,107	$	965	$	—	$	443,517

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 a 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 on 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 Senior 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 the first six months of 2014 and 2013 totaling $8.4 million and $20.7 million, respectively, under such parameters. In addition, the Company offers consumer loan customers an annual skip-a-pay program that is based on certain qualifying parameters and not based on financial difficulties. The Company does not treat these as troubled debt restructurings.

As of June 30, 2014, December 31, 2013 and June 30, 2013, the Company had a balance of $21.1 million, $20.9 million and $20.6 million, respectively, in troubled debt restructurings, excluding purchased non-covered and covered loans. The Company has recorded $3.0 million, $2.1 million and $2.0 million in previous charge-offs on such loans at June 30, 2014, December 31, 2013 and June 30, 2013, respectively. The Company’s balance in the allowance for loan losses allocated to such troubled debt restructurings was $398,000, $432,000 and $482,000 at June 30, 2014, December 31, 2013 and June 30, 2013, respectively. At June 30, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings. Troubled debt restructurings with an outstanding balance of $130,218 at December 31, 2013 defaulted during the first six months of 2014 and these defaults did not have a material impact on the Company’s allowance for loan loss.

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as accrual and non-accrual at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		3	$	257		3	$	465
Real estate – construction & development		12		2,080		2		32
Real estate – commercial & farmland		19		7,590		4		2,151
Real estate – residential		38		7,335		8		1,044
Consumer installment		14		75		5		51

Total		86	$	17,337		22	$	3,743


As of December 31, 2013	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		4	$	515		3	$	525
Real estate – construction & development		8		1,896		2		32
Real estate – commercial & farmland		17		6,913		4		2,273
Real estate – residential		37		7,818		8		834
Consumer installment		6		72		3		19

Total		72	$	17,214		20	$	3,683


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		7	$	1,059		—	$	—
Real estate – construction & development		7		1,946		1		29
Real estate – commercial & farmland		16		7,529		2		1,493
Real estate – residential		30		7,468		6		1,046
Consumer installment		1		13		—		—

Total		61	$	18,015		9	$	2,568

The following table presents the amount of troubled debt restructurings by loan class, excluding purchased non-covered and covered loans, classified separately as those currently paying under restructured terms and those that have defaulted (defined as 30 days past due) under restructured terms at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		5	$	272		1	$	449
Real estate – construction & development		10		2,042		4		69
Real estate – commercial & farmland		20		7,895		3		1,846
Real estate – residential		34		6,582		12		1,798
Consumer installment		14		92		5		35

Total		83	$	16,883		25	$	4,197


As of December 31, 2013	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		4	$	515		3	$	525
Real estate – construction & development		8		1,896		2		32
Real estate – commercial & farmland		16		6,396		5		2,789
Real estate – residential		32		6,699		13		1,953
Consumer installment		7		90		2		2

Total		67	$	15,596		25	$	5,301


As of June 30, 2013	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Commercial, financial & agricultural		7	$	1,059		—	$	—
Real estate – construction & development		7		1,946		1		29
Real estate – commercial & farmland		16		7,529		2		1,493
Real estate – residential		31		7,788		5		726
Consumer installment		1		13		—		—

Total		62	$	18,335		8	$	2,248

The following table presents the amount of troubled debt restructurings, excluding purchased non-covered and covered loans, by types of concessions made, classified separately as accrual and non-accrual at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Accruing Loans				Non-Accruing Loans
Type of concession:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Forbearance of interest		12	$	2,145		—	$	—
Forgiveness of principal		5		2,448		—		—
Rate reduction only		14		6,842		5		1,176
Rate reduction, forbearance of interest		38		3,204		14		2,522
Rate reduction, forbearance of principal		17		2,698		2		16
Rate reduction, payment modification		—		—		1		29

Total		86	$	17,337		22	$	3,743


As of December 31, 2013	Accruing Loans				Non-Accruing Loans
Type of concession:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Forbearance of interest		10	$	2,170		2	$	97
Forgiveness of principal		3		1,467		1		145
Payment modification only		1		280		1		88
Rate reduction only		14		7,069		3		913
Rate reduction, forbearance of interest		26		3,252		12		2,411
Rate reduction, forbearance of principal		18		2,976		—		—
Rate reduction, payment modification		—		—		1		29

Total		72	$	17,214		20	$	3,683


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Type of concession:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Forbearance of interest		9	$	2,168		2	$	105
Forgiveness of principal		3		1,493		1		145
Payment modification only		2		373		—		—
Rate reduction only		12		6,924		2		496
Rate reduction, forbearance of interest		18		4,724		1		222
Rate reduction, forbearance of principal		17		2,333		2		1,571
Rate reduction, payment modification		—		—		1		29

Total		61	$	18,015		9	$	2,568

The following table presents the amount of troubled debt restructurings, excluding purchased non-covered and covered loans, by collateral types, classified separately as accrual and non-accrual at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Warehouse		4	$	1,385		2	$	469
Raw land		5		1,279		1		29
Agricultural land		2		374		—		—
Hotel & motel		3		2,101		—		—
Office		4		1,644		—		—
Retail, including strip centers		5		1,722		2		1,682
1-4 family residential		46		8,144		10		1,063
Church		1		364		—		—
Automobile/equipment/inventory		15		84		7		500
Unsecured		1		240		—		—

Total		86	$	17,337		22	$	3,743


As of December 31, 2013	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Warehouse		4	$	1,346		2	$	592
Raw land		11		2,345		2		32
Hotel & motel		3		2,185		—		—
Office		4		1,909		—		—
Retail, including strip centers		4		1,095		2		1,680
1-4 family residential		36		7,747		9		852
Life insurance policy		1		250		—		—
Automobile/equipment/inventory		8		92		4		479
Unsecured		1		245		1		48

Total		72	$	17,214		20	$	3,683


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance *(in thousands)*		#		Balance *(in thousands)*
Warehouse		2	$	345		2	$	1,493
Raw land		3		1,354		1		29
Agricultural land		1		66		—		—
Hotel & motel		3		2,233		—		—
Office		4		2,085		—		—
Retail, including strip centers		6		2,800		—		—
1-4 family residential		34		8,061		6		1,046
Life insurance policy		1		249		—		—
Automobile/equipment/inventory		5		522		—		—
Unsecured		2		300		—		—

Total		61	$	18,015		9	$	2,568

As of June 30, 2014 and December 31, 2013, the Company did not have any troubled debt restructurings included in purchased non-covered loans.

As of June 30, 2014, December 31, 2013 and June 30, 2013, the Company had a balance of $9.8 million, $9.1 million and $10.4 million, respectively, in troubled debt restructurings included in covered loans. The Company has recorded $42,000, $64,000 and $36,000 in previous charge-offs on such loans at June 30, 2014, December 31, 2013 and June 30, 2013, respectively. At June 30, 2014, the Company did not have any commitments to lend additional funds to debtors whose terms have been modified in troubled restructurings.

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as accrual and non-accrual at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Commercial, financial & agricultural		—	$	—		1	$	24
Real estate – construction & development		—		—		1		14
Real estate – commercial & farmland		5		1,066		2		152
Real estate – residential		82		8,155		7		403
Consumer installment		—		—		1		4

Total		87	$	9,221		12	$	597


As of December 31, 2013	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Commercial, financial & agricultural		—	$	—		2	$	67
Real estate – construction & development		—		—		1		16
Real estate – commercial & farmland		4		579		1		134
Real estate – residential		72		7,830		6		464
Consumer installment		—		—		1		5

Total		76	$	8,409		11	$	686


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Commercial, financial & agricultural		1	$	40		—	$	—
Real estate – construction & development		2		2,159		1		10
Real estate – commercial & farmland		4		573		1		19
Real estate – residential		63		7,481		2		122
Consumer installment		—		—		—		—

Total		70	$	10,253		4	$	151

The following table presents the amount of troubled debt restructurings by loan class of covered loans, classified separately as those currently paying under restructured terms and those that have defaulted under restructured terms at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Commercial, financial & agricultural		1	$	24		—	$	—
Real estate – construction & development		—		—		1		14
Real estate – commercial & farmland		7		1,217		—		—
Real estate – residential		76		7,297		13		1,262
Consumer installment		1		4		—		—

Total		85	$	8,542		14	$	1,276


As of December 31, 2013	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Commercial, financial & agricultural		1	$	27		1	$	40
Real estate – construction & development		1		16		—		—
Real estate – commercial & farmland		5		713		—		—
Real estate – residential		58		5,830		20		2,463
Consumer installment		1		6		—		—

Total		66	$	6,592		21	$	2,503


As of June 30, 2013	Loans Currently Paying Under Restructured Terms				Loans that have Defaulted Under Restructured Terms
Loan class:	#		Balance (in thousands)		#		Balance (in thousands)
Commercial, financial & agricultural		1	$	40		—	$	—
Real estate – construction & development		2		2,159		1		11
Real estate – commercial & farmland		5		592		—		—
Real estate – residential		57		5,808		8		1,794
Consumer installment		—		—		—		—

Total		65	$	8,599		9	$	1,805

The following table presents the amount of troubled debt restructurings included in covered loans, by types of concessions made, classified separately as accrual and non-accrual at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Forbearance of Interest		—	$	—		1	$	24
Forbearance of Principal		—		—		1		26
Rate Reduction Only		78		7,835		6		374
Rate Reduction, Forbearance of Interest		3		88		3		45
Rate Reduction, Forbearance of Principal		6		1,298		1		128

Total		87	$	9,221		12	$	597


As of December 31, 2013	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Rate Reduction Only		68	$	7,510		6	$	457
Rate Reduction, Forbearance of Interest		3		88		4		96
Rate Reduction, Forbearance of Principal		5		811		1		133

Total		76	$	8,409		11	$	686


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Type of Concession:	#		Balance (in thousands)		#		Balance (in thousands)
Forbearance of Interest		4	$	260		1	$	11
Rate Reduction Only		57		9,051		3		140
Rate Reduction, Forbearance of Interest		4		129		—		—
Rate Reduction, Forbearance of Principal		5		813		—		—

Total		70	$	10,253		4	$	151

The following table presents the amount of troubled debt restructurings included in covered loans, by collateral types, classified separately as accrual and non-accrual at June 30, 2014, December 31, 2013 and June 30, 2013:


As of June 30, 2014	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Raw Land		—	$	—		2	$	38
Hotel & Motel		1		175		—		—
Office		1		488		—		—
Retail, including Strip Centers		2		280		1		128
1-4 Family Residential		83		8,278		8		407
Automobile/Equipment/Inventory		—		—		1		24

Total		87	$	9,221		12	$	597


As of December 31, 2013	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Raw Land		—	$	—		1	$	16
Hotel & Motel		1		172		—		—
Retail, including Strip Centers		2		283		1		134
1-4 Family Residential		73		7,954		7		469
Automobile/Equipment/Inventory		—		—		2		67

Total		76	$	8,409		11	$	686


As of June 30, 2013	Accruing Loans				Non-Accruing Loans
Collateral type:	#		Balance (in thousands)		#		Balance (in thousands)
Raw Land		1	$	366		1	$	10
Hotel & Motel		1		170		—		—
Retail, including Strip Centers		2		277		1		19
1-4 Family Residential		65		9,400		2		122
Automobile/Equipment/Inventory		1		40		—		—

Total		70	$	10,253		4	$	151

Allowance for Loan Losses

The allowance for loan losses represents an allowance for probable incurred losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated periodically based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes might be potentially impaired or warrant additional attention. The Company segregates the loan portfolio by type of loan and utilizes this segregation in evaluating exposure to risks within the portfolio. In addition, based on internal reviews and external reviews performed by independent auditors and regulatory authorities, the Company further segregates the loan portfolio by loan grades based on an assessment of risk for a particular loan or group of loans. Certain reviewed loans are assigned specific allowances when a review of relevant data determines that a general allocation is not sufficient or when the review affords management the opportunity to adjust the amount of exposure in a given credit. In establishing allowances, management considers historical loan loss experience but adjusts this data with a significant emphasis on data such as current loan quality trends, current economic conditions and other factors in the markets where the Company operates. Factors considered include, among others, current valuations of real estate in their markets, unemployment rates, the effect of weather conditions on agricultural related entities and other significant local economic events.

The Company has developed a methodology for determining the adequacy of the allowance for loan losses which is monitored by the Company’s Chief Credit Officer. Procedures provide for the assignment of a risk rating for every loan included in the total loan portfolio, with the exception of credit card receivables and overdraft protection loans which are treated as pools for risk rating purposes. The risk rating schedule provides nine ratings of which five ratings are classified as pass ratings and four ratings are classified as criticized ratings. Each risk rating is assigned a percentage factor to be applied to the loan balance to determine the adequate amount of reserve. Relationships greater than $250,000 are reviewed annually by the Bank’s independent internal loan review department or an independent third party loan review firm. As a result of these loan reviews, certain loans may be identified as having deteriorating credit quality. Other loans that surface as problem loans may also be assigned specific reserves. Past due loans are assigned risk ratings based on the number of days past due. The calculation of the allowance for loan losses, including underlying data and assumptions, is reviewed regularly by the Company’s Chief Financial Officer and the loan review department.

Loan losses are charged against the allowance when management believes the collection of a loan’s principal is unlikely. Subsequent recoveries are credited to the allowance. Consumer loans are charged-off in accordance with the Federal Financial Institutions Examination Council’s (“FFIEC”) Uniform Retail Credit Classification and Account Management Policy. Commercial loans are charged-off when they are deemed uncollectible, which usually involves a triggering event within the collection effort. If the loan is collateral dependent, the loss is more easily identified and is charged-off when it is identified, usually based upon receipt of an appraisal. However, when a loan has guarantor support, the Company may carry the estimated loss as a reserve against the loan while collection efforts with the guarantor are pursued. If, after collection efforts with the guarantor are complete, the deficiency is still considered uncollectible, the loss is charged-off and any further collections are treated as recoveries. In all situations, when a loan is downgraded to an Asset Quality Rating of 60 (Loss per the regulatory guidance), the uncollectible portion is charged-off.

During the six months ended June 30, 2014, the year ended December 31, 2013 and the six months ended June 30, 2013, the Company recorded provision for loan loss expense of $593,000, $1.5 million and $790,000, respectively, to account for losses where the initial estimate of cash flows was found to be excessive on loans acquired in FDIC-assisted transactions. These amounts are excluded from the rollforwards below but are reflected in the Company’s Consolidated Statements of Earnings and Comprehensive Income. Charge-offs on purchased covered loans are recorded when impairment is recorded and provision expense is recorded net of the indemnification by the FDIC loss-share agreements.

The following table details activity in the allowance for loan losses by portfolio segment for the six months ended June 30, 2014, the year ended December 31, 2013 and the six months ended June 30, 2013. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in Thousands)
Balance, January 1, 2014	$	1,823		$	5,538		$	8,393		$	6,034		$	589		$	22,377
Provision for loan losses		1,087			(89	)		1,074			(66	)		492			2,498
Loans charged off		(908	)		(222	)		(1,302	)		(933	)		(214	)		(3,579	)
Recoveries of loans previously charged off		183			204			152			131			288			958

Balance, June 30, 2014	$	2,185		$	5,431		$	8,317		$	5,166		$	1,155		$	22,254

Period-end amount allocated to:
Loans individually evaluated for impairment	$	282		$	710		$	1,652		$	801		$	—		$	3,445
Loans collectively evaluated for impairment		1,903			4,721			6,665			4,365			1,155			18,809

Ending balance	$	2,185		$	5,431		$	8,317		$	5,166		$	1,155		$	22,254

Loans:
Individually evaluated for impairment	$	855		$	3,264		$	16,865		$	11,538		$	—		$	32,522
Collectively evaluated for impairment		303,733			146,082			833,135			411,193			43,394			1,737,537

Ending balance	$	304,588		$	149,346		$	850,000		$	422,731		$	43,394		$	1,770,059


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in Thousands)
Balance, January 1, 2013	$	2,439		$	5,343		$	9,157		$	5,898		$	756		$	23,593
Provision for loan losses		711			1,742			2,777			4,463			254			9,947
Loans charged off		(1,759	)		(2,020	)		(3,571	)		(5,215	)		(719	)		(13,284	)
Recoveries of loans previously charged off		432			473			30			888			298			2,121

Balance, December 31, 2013	$	1,823		$	5,538		$	8,393		$	6,034		$	589		$	22,377

Period-end amount allocated to:
Loans individually evaluated for impairment	$	356		$	407		$	1,427		$	1,395		$	—		$	3,585
Loans collectively evaluated for impairment		1,467			5,131			6,966			4,639			589			18,792

Ending balance	$	1,823		$	5,538		$	8,393		$	6,034		$	589		$	22,377

Loans:
Individually evaluated for impairment	$	3,457		$	3,581		$	15,240		$	16,925		$	—		$	39,203
Collectively evaluated for impairment		240,916			142,790			793,083			349,957			52,505			1,579,251

Ending balance	$	244,373		$	146,371		$	808,323		$	366,882		$	52,505		$	1,618,454


	Commercial, financial & agricultural			Real estate - construction & development			Real estate - commercial & farmland			Real estate - residential			Consumer installment loans and Other			Total
	(Dollars in Thousands)
Balance, January 1, 2013	$	2,439		$	5,343		$	9,157		$	5,898		$	756		$	23,593
Provision for loan losses		1,118			1,526			1,420			2,340			(106	)		6,298
Loans charged off		(734	)		(1,231	)		(1,793	)		(2,107	)		(371	)		(6,236	)
Recoveries of loans previously charged off		128			4			13			229			188			562

Balance, June 30, 2013	$	2,951		$	5,642		$	8,797		$	6,360		$	467		$	24,217

Period-end amount allocated to:
Loans individually evaluated for impairment	$	876		$	467		$	1,629		$	1,573		$	—		$	4,545
Loans collectively evaluated for impairment		2,075			5,175			7,168			4,787			467			19,672

Ending balance	$	2,951		$	5,642		$	8,797		$	6,360		$	467		$	24,217

Loans:
Individually evaluated for impairment	$	3,705		$	3,935		$	15,842		$	15,329		$	—		$	38,811
Collectively evaluated for impairment		204,719			130,672			772,812			342,356			66,457			1,517,016

Ending balance	$	208,424		$	134,607		$	788,654		$	357,685		$	66,457		$	1,555,827