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Note 4 - Loans

6 Months Ended

Jun. 30, 2020

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4. Loans

The Company groups loans held for investment into three segments (commercial loans, consumer real estate loans, and consumer and other loans) with each segment divided into various classes. Covered loans are those loans acquired in Federal Deposit Insurance Corporation (“FDIC”) assisted transactions that are covered by loss share agreements. Customer overdrafts reclassified as loans totaled $1.41 million as of June 30, 2020, and $2.20 million as of December 31, 2019. Deferred loan fees, net of loan costs, totaled $6.04 million as of June 30, 2020, and $4.60 million as of December 31, 2019. For information about off-balance sheet financing, see Note 15, “Litigation, Commitments, and Contingencies,” to the Condensed Consolidated Financial Statements of this report.

The following table presents loans, net of unearned income, within the non-covered portfolio by loan class, as of the dates indicated:

	June 30, 2020					December 31, 2019
(Amounts in thousands)	Amount		Percent			Amount		Percent
Non-covered loans held for investment
Commercial loans
Construction, development, and other land	$	52,585		2.46	%	$	48,659		2.30	%
Commercial and industrial		184,298		8.62	%		142,962		6.76	%
Multi-family residential		105,768		4.95	%		121,840		5.76	%
Single family non-owner occupied		188,389		8.82	%		163,181		7.72	%
Non-farm, non-residential		723,100		33.84	%		727,261		34.39	%
Agricultural		10,407		0.49	%		11,756		0.56	%
Farmland		23,662		1.11	%		23,155		1.10	%
Total commercial loans		1,288,209		60.29	%		1,238,814		58.59	%
Consumer real estate loans
Home equity lines		99,566		4.66	%		110,078		5.21	%
Single family owner occupied		603,446		28.24	%		620,697		29.35	%
Owner occupied construction		15,311		0.72	%		17,241		0.82	%
Total consumer real estate loans		718,323		33.62	%		748,016		35.38	%
Consumer and other loans
Consumer loans		114,551		5.36	%		110,027		5.20	%
Other		4,477		0.21	%		4,742		0.22	%
Total consumer and other loans		119,028		5.57	%		114,769		5.42	%
Total non-covered loans		2,125,560		99.48	%		2,101,599		99.39	%
Total covered loans		11,257		0.52	%		12,861		0.61	%
Total loans held for investment, net of unearned income	$	2,136,817		100.00	%	$	2,114,460		100.00	%

Loans held for sale	$	-				$	263

Commercial and industrial loan balances grew significantly compared to December 31, 2019. The Company began participating as a Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) lender during the second quarter of 2020. At June 30, 2020, the PPP loans had a current balance of $60.23 million, and were included in commercial and industrial loan balances. Deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which totaled $2.26 million at June 30, 2020, were also recorded. During the second quarter of 2020, the Company recorded amortization of net deferred loan origination fees of $192 thousand on PPP loans. The remaining net deferred loan origination fees will be amortized over the expected life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income.

The following table presents the covered loan portfolio, by loan class, as of the dates indicated:

	June 30, 2020		December 31, 2019
(Amounts in thousands)
Covered loans
Commercial loans
Construction, development, and other land	$	27	$	28
Single family non-owner occupied		191		199
Non-farm, non-residential		1		3
Total commercial loans		219		230
Consumer real estate loans
Home equity lines		8,512		9,853
Single family owner occupied		2,526		2,778
Total consumer real estate loans		11,038		12,631
Total covered loans	$	11,257	$	12,861

The Company identifies certain purchased loans as impaired when fair values are established at acquisition and groups those purchased credit impaired (“PCI”) loans into loan pools with common risk characteristics. The Company estimates cash flows to be collected on PCI loans and discounts those cash flows at a market rate of interest. Effective January 1, 2020, the Company consolidated the insignificant PCI loans and discounts for Peoples, Waccamaw, and other acquired loans into the core loan portfolio. The only remaining PCI pools are those loans acquired in the Highlands acquisition on December 31, 2019.

The following table presents the recorded investment and contractual unpaid principal balance of PCI loans, by acquisition, as of the dates indicated:

	June 30, 2020				December 31, 2019
(Amounts in thousands)	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance
PCI Loans, by acquisition
Peoples	$	-	$	-	$	5,071	$	6,431
Waccamaw		-		-		2,708		14,277
Highlands		48,193		58,181		53,116		64,096
Other acquired		-		-		352		378
Total PCI Loans	$	48,193	$	58,181	$	61,247	$	85,182

The following table presents the changes in the accretable yield on PCI loans, by acquisition, during the periods indicated:

	Peoples			Waccamaw			Highlands			Total
(Amounts in thousands)
Balance January 1, 2019	$	2,590		$	14,639		$	-		$	17,229
Accretion		(503	)		(2,151	)		-			(2,654	)
Reclassifications (to) from nonaccretable difference⁽¹⁾		11			851			-			862
Other changes, net		111			341			-			452
Balance June 30, 2019	$	2,209		$	13,680		$	-		$	15,889

Balance January 1, 2020	$	1,890		$	12,574		$	8,152		$	22,616
Accretion		-			-			(1,334	)		(1,334	)
Reclassifications from nonaccretable difference⁽¹⁾		-			-			-			-
Other changes, net		(1,890	)		(12,574	)		-			(14,464	)
Balance June 30, 2020	$	-		$	-		$	6,818		$	6,818

(1) Represents changes attributable to expected loss assumptions