NOTE 5 – LOANS

 

The following table details the Company’s loans at June 30, 2014 and December 31, 2013 :

 

		June 30,				December 31,
		2014				2013
		(Dollars In Thousands)
Commercial, financial and agricultural		$	1,362,757			$	1,278,649
Real estate - construction			178,033				151,868
Real estate - mortgage:
Owner-occupied commercial			708,294				710,372
1-4 family mortgage			296,220				278,621
Other mortgage			457,845				391,396
Subtotal: Real estate - mortgage			1,462,359				1,380,389
Consumer			50,840				47,962
Total Loans			3,053,989				2,858,868
Less: Allowance for loan losses			(32,984)				(30,663)
Net Loans		$	3,021,005			$	2,828,205
Commercial, financial and agricultural			44.62	%			44.73	%
Real estate - construction			5.83	%			5.31	%
Real estate - mortgage:
Owner-occupied commercial			23.19	%			24.85	%
1-4 family mortgage			9.70	%			9.74	%
Other mortgage			14.99	%			13.69	%
Subtotal: Real estate - mortgage			47.88	%			48.28	%
Consumer			1.67	%			1.68	%
Total Loans			100.00	%			100.00	%

 

The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. The following table presents credit quality indicators for the loan loss portfolio segments and classes. These categories are utilized to develop the associated allowance for loan losses using historical losses adjusted for current economic conditions defined as follows:

 

 

 

 

 

Loans by credit quality indicator as of June 30, 2014 and December 31, 2013 were as follows:

  

					Special
June 30, 2014		Pass			Mention			Substandard			Doubtful			Total
		(In Thousands)
Commercial, financial and agricultural		$	1,320,071		$	38,801		$	3,885		$	-		$	1,362,757
Real estate - construction			164,167			5,260			8,606			-			178,033
Real estate - mortgage:
Owner-occupied commercial			690,258			15,830			2,206			-			708,294
1-4 family mortgage			287,379			589			8,252			-			296,220
Other mortgage			441,072			11,824			4,949			-			457,845
Total real estate mortgage			1,418,709			28,243			15,407			-			1,462,359
Consumer			50,045			-			795			-			50,840
Total		$	2,952,992		$	72,304		$	28,693		$	-		$	3,053,989

 

					Special
December 31, 2013		Pass			Mention			Substandard			Doubtful			Total
		(In Thousands)
Commercial, financial and agricultural		$	1,238,109		$	34,883		$	5,657		$	-		$	1,278,649
Real estate - construction			139,239			3,392			9,237			-			151,868
Real estate - mortgage:
Owner-occupied commercial			696,687			11,545			2,140			-			710,372
1-4 family mortgage			265,019			1,253			12,349			-			278,621
Other mortgage			379,419			8,179			3,798			-			391,396
Total real estate mortgage			1,341,125			20,977			18,287			-			1,380,389
Consumer			47,243			3			716			-			47,962
Total		$	2,765,716		$	59,255		$	33,897		$	-		$	2,858,868

 

Loans by performance status as of June 30, 2014 and December 31, 2013 were as follows:

 

June 30, 2014		Performing			Nonperforming			Total
		(In Thousands)
Commercial, financial and agricultural		$	1,361,701		$	1,056		$	1,362,757
Real estate - construction			170,432			7,601			178,033
Real estate - mortgage:
Owner-occupied commercial			706,711			1,583			708,294
1-4 family mortgage			295,021			1,199			296,220
Other mortgage			456,886			959			457,845
Total real estate mortgage			1,458,618			3,741			1,462,359
Consumer			50,045			795			50,840
Total		$	3,040,796		$	13,193		$	3,053,989

 

December 31, 2013		Performing			Nonperforming			Total
		(In Thousands)
Commercial, financial and agricultural		$	1,276,935		$	1,714		$	1,278,649
Real estate - construction			148,118			3,750			151,868
Real estate - mortgage:
Owner-occupied commercial			708,937			1,435			710,372
1-4 family mortgage			276,725			1,896			278,621
Other mortgage			391,153			243			391,396
Total real estate mortgage			1,376,815			3,574			1,380,389
Consumer			47,264			698			47,962
Total		$	2,849,132		$	9,736		$	2,858,868

 

Loans by past due status as of June 30, 2014 and December 31, 2013 were as follows:

 

June 30, 2014		Past Due Status (Accruing Loans)
											Total Past
		30-59 Days			60-89 Days			90+ Days			Due			Non-Accrual			Current			Total Loans
		(In Thousands)
Commercial, financial and agricultural		$	1,018		$	-		$	-		$	1,018		$	1,056		$	1,360,683		$	1,362,757
Real estate - construction			673			-			-			673			7,601			169,759			178,033
Real estate - mortgage:
Owner-occupied commercial			293			-			-			293			1,583			706,418			708,294
1-4 family mortgage			530			-			-			530			1,199			294,491			296,220
Other mortgage			-			-			-			-			959			456,886			457,845
Total real estate - mortgage			823			-			-			823			3,741			1,457,795			1,462,359
Consumer			7			-			-			7			795			50,038			50,840
Total		$	2,521		$	-		$	-		$	2,521		$	13,193		$	3,038,275		$	3,053,989

 

December 31, 2013		Past Due Status (Accruing Loans)
											Total Past
		30-59 Days			60-89 Days			90+ Days			Due			Non-Accrual			Current			Total Loans
		(In Thousands)
Commercial, financial and agricultural		$	73		$	-		$	-		$	73		$	1,714		$	1,276,862		$	1,278,649
Real estate - construction			-			-			-			-			3,750			148,118			151,868
Real estate - mortgage:
Owner-occupied commercial			-			-			-			-			1,435			708,937			710,372
1-4 family mortgage			177			-			19			196			1,877			276,548			278,621
Other mortgage			-			-			-			-			243			391,153			391,396
Total real estate - mortgage			177			-			19			196			3,555			1,376,638			1,380,389
Consumer			89			97			96			282			602			47,078			47,962
Total		$	339		$	97		$	115		$	551		$	9,621		$	2,848,696		$	2,858,868

 

The allowance for loan losses is maintained at a level which, in management’s judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of the estimated cash flows. The allowance is increased by a provision for loan losses, which is charged to expense, and reduced by charge-offs, net of recoveries. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the allowance for losses on loans. Such agencies may require the Company to recognize adjustments to the allowance based on their judgments about information available to them at the time of their examination.

 

The methodology utilized for the calculation of the allowance for loan losses is divided into four distinct categories. Those categories include allowances for non-impaired loans (ASC 450), impaired loans (ASC 310), external qualitative factors, and internal qualitative factors. A description of each category of the allowance for loan loss methodology is listed below.

Non-Impaired Loans. Non-impaired loans are grouped into homogeneous loan pools by loan type and are the following: commercial and industrial, construction and development, commercial real estate, second lien home equity lines of credit, and all other loans. Each loan pool is stratified by internal risk rating and multiplied by a loss allocation percentage derived from the loan pool historical loss rate. The historical loss rate is based on an age weighted 5 year history of net charge-offs experienced by pool, with the most recent net charge-off experience given a greater weighting. This results in the expected loss rate per year, adjusted by a qualitative adjustment factor and a years-to-impairment factor, for each pool of loans to derive the total amount of allowance for non-impaired loans.

 

Impaired Loans. Loans are considered impaired when based on current information and events it is probable that the Bank will be unable to collect all amounts due according to the original terms of the loan agreement. The collection of all amounts due according to contractual terms means that both the contractual interest and principal payments of a loan will be collected as scheduled in the loan agreement. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, at the loan’s observable market price or the fair value of the underlying collateral. The fair value of collateral, reduced by costs to sell on a discounted basis, is used if a loan is collateral-dependent. Fair value estimates for specifically impaired collateral-dependent loans are derived from appraised values based on the current market value or as is value of the property, normally from recently received and reviewed appraisals. Appraisals are obtained from certified and licensed appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property.  These appraisals are reviewed by our credit administration department, and values are adjusted downward to reflect anticipated disposition costs. Once this estimated net realizable value has been determined, the value used in the impairment assessment is updated for each impaired loan. As subsequent events dictate and estimated net realizable values decline, required reserves may be established or further adjustments recorded.

 

External Qualitative Factors . The determination of the portion of the allowance for loan losses relating to external qualitative factors is based on consideration of the following factors: gross domestic product growth rate, changes in prime rate, delinquency trends, peer delinquency trends, year over year loan growth and state unemployment rate trends. Data for the three most recent periods is utilized in the calculation for each external qualitative component. The factors have a consistent weighted methodology to calculate the amount of allowance due to external qualitative factors.

 

Internal Qualitative Factors . The determination of the portion of the allowance for loan losses relating to internal qualitative factors is based on the consideration of criteria which includes the following: number of extensions and deferrals, single pay and interest only loans, current financial information, credit concentrations and risk grade accuracy. A self-assessment for each of the criteria is made with a consistent weighted methodology used to calculate the amount of allowance required for internal qualitative factors.

 

The following table presents an analysis of the allowance for loan losses by portfolio segment as of June 30, 2014 and December 31, 2013. The total allowance for loan losses is disaggregated into those amounts associated with loans individually evaluated and those associated with loans collectively evaluated.