Note 7 – Loans and Asset Quality Information

The loans and foreclosed real estate that were acquired in FDIC-assisted transactions are covered by loss share agreements between the FDIC and the Company's banking subsidiary, First Bank, which afford First Bank significant loss protection - see Note 2 to the financial statements included in the Company's 2011 Annual Report on Form 10-K for detailed information regarding these transactions. Because of the loss protection provided by the FDIC, the risk of the loans and foreclosed real estate that are covered by loss share agreements are significantly different from those assets not covered under the loss share agreements. Accordingly, the Company presents separately loans subject to the loss share agreements as “covered loans” in the information below and loans that are not subject to the loss share agreements as “non-covered loans.”

On July 1, 2014, one of the Company's loss share agreements with the FDIC expired. The agreement that expired related to the non-single family assets of Cooperative Bank, a failed bank acquisition from June 2009. Accordingly, the remaining balances associated with these loans and foreclosed real estate were transferred from the covered portfolio to the non-covered portfolio on July 1, 2014. The Company will bear all future losses on this portfolio of loans and foreclosed real estate. Immediately prior to the transfer to non-covered status, the loans in this portfolio had a carrying value of $39.7 million and the foreclosed real estate in this portfolio had a carrying value of $3.0 million. Of the $39.7 million in loans that lost loss share protection, approximately $9.7 million were on nonaccrual status and $2.1 million were classified as accruing troubled debt restructurings as of July 1, 2014. Additionally, approximately $1.7 million in allowance for loan losses associated with this portfolio of loans was transferred to the allowance for loan losses for non-covered loans on July 1, 2014.

The following is a summary of the major categories of total loans outstanding:

($ in thousands)	June 30, 2015				December 31, 2014				June 30, 2014
	Amount		Percentage		Amount		Percentage		Amount		Percentage
All loans (non-covered and covered):

Commercial, financial, and agricultural	$	179,909		7%	$	160,878		7%	$	165,021		7%
Real estate – construction, land development & other land loans		282,262		12%		288,148		12%		295,868		12%
Real estate – mortgage – residential (1-4 family) first mortgages		777,515		32%		789,871		33%		814,712		33%
Real estate – mortgage – home equity loans / lines of credit		220,534		9%		223,500		9%		227,381		9%
Real estate – mortgage – commercial and other		904,496		38%		882,127		37%		868,599		36%
Installment loans to individuals		47,244		2%		50,704		2%		62,153		3%
Subtotal		2,411,960		100%		2,395,228		100%		2,433,734		100%
Unamortized net deferred loan costs		819				946				651
Total loans	$	2,412,779			$	2,396,174			$	2,434,385

The following is a summary of the major categories of non-covered loans outstanding:

($ in thousands)	June 30, 2015				December 31, 2014				June 30, 2014
	Amount		Percentage		Amount		Percentage		Amount		Percentage
Non-covered loans:

Commercial, financial, and agricultural	$	178,756		8%	$	159,195		7%	$	162,303		7%
Real estate – construction, land development & other land loans		278,406		12%		282,604		13%		274,975		12%
Real estate – mortgage – residential (1-4 family) first mortgages		694,794		30%		700,101		31%		718,962		32%
Real estate – mortgage – home equity loans / lines of credit		208,778		9%		210,697		9%		213,542		9%
Real estate – mortgage – commercial and other		890,158		39%		864,333		38%		825,450		37%
Installment loans to individuals		47,244		2%		50,704		2%		61,647		3%
Subtotal		2,298,136		100%		2,267,634		100%		2,256,879		100%
Unamortized net deferred loan costs		819				946				651
Total non-covered loans	$	2,298,955			$	2,268,580			$	2,257,530

The carrying amount of the covered loans at June 30, 2015 consisted of impaired and nonimpaired purchased loans (as determined on the date of acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	60		118		1,093		1,132		1,153		1,250
Real estate – construction, land development & other land loans		301		526		3,555		3,962		3,856		4,488
Real estate – mortgage – residential (1-4 family) first mortgages		310		1,275		82,411		96,461		82,721		97,736
Real estate – mortgage – home equity loans / lines of credit		8		15		11,748		13,635		11,756		13,650
Real estate – mortgage – commercial and other		1,092		3,162		13,246		14,111		14,338		17,273
Total	$	1,771		5,096		112,053		129,301		113,824		134,397

The carrying amount of the covered loans at December 31, 2014 consisted of impaired and nonimpaired purchased loans (as determined on the date of the acquisition), as follows:

($ in thousands)	Impaired Purchased Loans – Carrying Value		Impaired Purchased Loans – Unpaid Principal Balance		Nonimpaired Purchased Loans – Carrying Value		Nonimpaired Purchased Loans - Unpaid Principal Balance		Total Covered Loans – Carrying Value		Total Covered Loans – Unpaid Principal Balance
Covered loans:
Commercial, financial, and agricultural	$	66		123		1,617		1,661		1,683		1,784
Real estate – construction, land development & other land loans		309		534		5,235		6,471		5,544		7,005
Real estate – mortgage – residential (1-4 family) first mortgages		362		1,298		89,408		104,678		89,770		105,976
Real estate – mortgage – home equity loans / lines of credit		12		19		12,791		15,099		12,803		15,118
Real estate – mortgage – commercial and other		1,201		3,209		16,593		17,789		17,794		20,998
Total	$	1,950		5,183		125,644		145,698		127,594		150,881

The following table presents information regarding covered purchased nonimpaired loans since December 31, 2013. The amounts include principal only and do not reflect accrued interest as of the date of the acquisition or beyond.

($ in thousands)
Carrying amount of nonimpaired covered loans at December 31, 2013	$	207,167
Principal repayments		(50,183	)
Transfers to foreclosed real estate		(5,061	)
Transfers to non-covered loans due to expiration of loss-share agreement		(38,987	)
Net loan (charge-offs) / recoveries		(3,301	)
Accretion of loan discount		16,009
Carrying amount of nonimpaired covered loans at December 31, 2014		125,644
Principal repayments		(15,709	)
Transfers to foreclosed real estate		(656	)
Net loan (charge-offs) / recoveries		82
Accretion of loan discount		2,692
Carrying amount of nonimpaired covered loans at June 30, 2015	$	112,053

As reflected in the table above, the Company accreted $2,692,000 of the loan discount on purchased nonimpaired loans into interest income during the first six months of 2015. As of June 30, 2015, there was remaining loan discount of $15,072,000 related to purchased accruing loans. If these loans continue to be repaid by the borrowers, the Company will accrete the remaining loan discount into interest income over the covered lives of the respective loans. In such circumstances, a corresponding entry to reduce the indemnification asset will be recorded amounting to approximately 80% of the loan discount accretion, which reduces noninterest income. At June 30, 2015, the Company also had $2,560,000 of loan discount related to purchased nonaccruing loans. It is not expected that a significant amount of this discount will be accreted, as it represents estimated losses on these loans.

The following table presents information regarding all purchased impaired loans since December 31, 2013, the majority of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.

($ in thousands) Purchased Impaired Loans	Contractual Principal Receivable		Fair Market Value Adjustment – Write Down (Nonaccretable Difference)		Carrying Amount
Balance at December 31, 2013	$	6,263		3,121		3,142
Change due to payments received		(599)		227		(826)
Change due to loan charge-off		(2)		29		(31)
Other		197		(115)		312
Balance at December 31, 2014		5,859		3,262		2,597
Change due to payments received		(99)		112		(211)
Other		(3)		(3)		
Balance at June 30, 2015	$	5,757		3,371		2,386

Because of the uncertainty of the expected cash flows, the Company is accounting for each purchased impaired loan under the cost recovery method, in which all cash payments are applied to principal. Thus, there is no accretable yield associated with the above loans. During the first six months of 2015 and 2014, the Company received $0 and $179,000, respectively, in payments that exceeded the initial carrying amount of the purchased impaired loans, which is included in the loan discount accretion amount discussed previously.

Nonperforming assets are defined as nonaccrual loans, restructured loans, loans past due 90 or more days and still accruing interest, nonperforming loans held for sale, and foreclosed real estate. Nonperforming assets are summarized as follows:

ASSET QUALITY DATA ($ in thousands)	June 30, 2015		December 31, 2014		June 30, 2014

Non-covered nonperforming assets
Nonaccrual loans	$	44,123	$	50,066	$	47,533
Restructured loans - accruing		32,059		35,493		27,250
Accruing loans > 90 days past due		-		—		—
Total non-covered nonperforming loans		76,182		85,559		74,783
Foreclosed real estate		9,954		9,771		9,346
Total non-covered nonperforming assets	$	86,136	$	95,330	$	84,129

Covered nonperforming assets
Nonaccrual loans (1)	$	7,378	$	10,508	$	20,938
Restructured loans - accruing		3,910		5,823		8,193
Accruing loans > 90 days past due		-		—		—
Total covered nonperforming loans		11,288		16,331		29,131
Foreclosed real estate		1,945		2,350		9,934
Total covered nonperforming assets	$	13,233	$	18,681	$	39,065

Total nonperforming assets	$	99,369	$	114,011	$	123,194

(1)	At June 30, 2015, December 31, 2014, and June 30, 2014, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $12.7 million, $16.0 million, and $34.3 million, respectively.

At June 30, 2015, the Company had $5.1 million in residential mortgage loans in process of foreclosure. The remaining tables in this note present information derived from the Company's allowance for loan loss model. Relevant accounting guidance requires certain disclosures to be disaggregated based on how the Company develops its allowance for loan losses and manages its credit exposure. This model combines loan types in a different manner than the tables previously presented.

The following table presents the Company's nonaccrual loans as of June 30, 2015.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	210		22		232
Commercial – secured		2,727		—		2,727
Secured by inventory and accounts receivable		86		34		120

Real estate – construction, land development & other land loans		6,387		96		6,483

Real estate – residential, farmland and multi-family		23,347		4,756		28,103

Real estate – home equity lines of credit		2,235		431		2,666

Real estate – commercial		8,663		2,039		10,702

Consumer		468		—		468
Total	$	44,123		7,378		51,501

The following table presents the Company's nonaccrual loans as of December 31, 2014.

($ in thousands)	Non-covered		Covered		Total
Commercial, financial, and agricultural:
Commercial – unsecured	$	187		1		188
Commercial – secured		2,927		—		2,927
Secured by inventory and accounts receivable		454		103		557

Real estate – construction, land development & other land loans		7,891		1,140		9,031

Real estate – residential, farmland and multi-family		24,459		7,785		32,244

Real estate – home equity lines of credit		2,573		278		2,851

Real estate – commercial		11,070		1,201		12,271

Consumer		505		—		505
Total	$	50,066		10,508		60,574

The following table presents an analysis of the payment status of the Company's loans as of June 30, 2015.

($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Nonaccrual Loans		Current		Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured	$	196		1		210		41,667		42,074
Commercial - secured		495		478		2,727		113,920		117,620
Secured by inventory and accounts receivable		—		—		86		23,241		23,327

Real estate – construction, land development & other land loans		445		98		6,387		249,505		256,435

Real estate – residential, farmland, and multi-family		4,452		2,406		23,347		818,158		848,363

Real estate – home equity lines of credit		806		69		2,235		195,235		198,345

Real estate - commercial		3,216		371		8,663		756,743		768,993

Consumer		331		266		468		41,914		42,979
Total non-covered	$	9,941		3,689		44,123		2,240,383		2,298,136
Unamortized net deferred loan costs										819
Total non-covered loans									$	2,298,955

Covered loans	$	632		653		7,378		105,161		113,824

Total loans	$	10,573		4,342		51,501		2,345,544		2,412,779

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 2015.

The following table presents an analysis of the payment status of the Company's loans as of December 31, 2014.

($ in thousands)	30-59 Days Past Due		60-89 Days Past Due		Nonaccrual Loans		Current		Total Loans Receivable
Non-covered loans
Commercial, financial, and agricultural:
Commercial - unsecured	$	191		35		187		36,871		37,284
Commercial - secured		1,003		373		2,927		102,671		106,974
Secured by inventory and accounts receivable		30		225		454		21,761		22,470

Real estate – construction, land development & other land loans		1,950		139		7,891		247,535		257,515

Real estate – residential, farmland, and multi-family		11,272		3,218		24,459		807,884		846,833

Real estate – home equity lines of credit		1,585		352		2,573		194,067		198,577

Real estate - commercial		3,738		996		11,070		738,981		754,785

Consumer		695		131		505		41,865		43,196
Total non-covered	$	20,464		5,469		50,066		2,191,635		2,267,634
Unamortized net deferred loan costs										946
Total non-covered loans									$	2,268,580

Covered loans	$	4,385		964		10,508		111,737		127,594

Total loans	$	24,849		6,433		60,574		2,303,372		2,396,174

The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2014.

The following table presents the activity in the allowance for loan losses for non-covered loans for the three and six months ended June 30, 2015.

($ in thousands)	Commercial, Financial, and Agricultural			Real Estate – Construction, Land Development, & Other Land Loans			Real Estate – Residential, Farmland, and Multi- family			Real Estate – Home Equity Lines of Credit			Real Estate – Commercial and Other			Consumer			Unallo- cated		Total

As of and for the three months ended June 30, 2015
Beginning balance	5,757			6,006			10,826			4,163			5,919			795			304		33,770
Charge-offs	(2,083		)	(702		)	(844		)	(496		)	(1,026		)	(252		)	-		(5,403)
Recoveries	260			50			156			28			193			100			-		787
Provisions	1,630			(338		)	(497		)	(528		)	(363		)	305			792		1,001
Ending balance	5,564			5,016			9,641			3,167			4,723			948			1,096		30,155

As of and for the six months ended June 30, 2015

Beginning balance	$	8,391			6,470			9,720			3,731			9,045			841			147		38,345
Charge-offs		(3,027	)		(1,958	)		(2,413	)		(563	)		(1,949	)		(853	)		−		(10,763)
Recoveries		348			317			172			45			395			191			−		1,468
Provisions		(148	)		187			2,162			(46	)		(2,768	)		769			949		1,105
Ending balance	$	5,564			5,016			9,641			3,167			4,723			948			1,096		30,155

Ending balances as of June 30, 2015: Allowance for loan losses

Individually evaluated for impairment	$	134			364			1,794			—			328			—			—		2,620

Collectively evaluated for impairment	$	5,430			4,652			7,847			3,167			4,395			948			1,096		27,535

Loans acquired with deteriorated credit quality	$	—			—			—			—			—			—			—		—

Loans receivable as of June 30, 2015:

Ending balance - total	$	183,021			256,435			848,363			198,345			768,993			42,979			−		2,298,136
Unamortized net deferred loan costs																						819
Total non-covered loans																					$	2,298,955

Ending balances as of June 30, 2015: Loans

Individually evaluated for impairment	$	764			4,920			23,833			—			17,453			—			—		46,970

Collectively evaluated for impairment	$	182,257			251,515			824,530			198,345			750,926			42,979			—		2,250,552

Loans acquired with deteriorated credit quality	$	—			—			—			—			614			—			—		614

The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2014.

($ in thousands)	Commercial, Financial, and Agricultural		Real Estate – Construction, Land Development, & Other Land Loans		Real Estate – Residential, Farmland, and Multi- family		Real Estate – Home Equity Lines of Credit		Real Estate – Commercial and Other		Consumer		Unallo- cated		Total

As of and for the year ended December 31, 2014

Beginning balance	$	7,432		12,966		15,142		1,838		5,524		1,513		(152)		44,263
Charge-offs		(4,039)		(2,148)		(4,417)		(912)		(3,048)		(1,724)		—		(16,288)
Recoveries		140		398		331		45		181		451		—		1,546
Transfer from covered category		36		813		51		—		833		4		—		1,737
Provisions		4,822		(5,559)		(1,387)		2,760		5,555		597		299		7,087
Ending balance	$	8,391		6,470		9,720		3,731		9,045		841		147		38,345

Ending balances as of December 31, 2014: Allowance for loan losses

Individually evaluated for impairment	$	211		415		1,686		—		165		—		—		2,477

Collectively evaluated for impairment	$	8,180		6,055		8,034		3,731		8,880		841		147		35,868

Loans acquired with deteriorated credit quality	$	—		—		—		—		—		—		—		—

Loans receivable as of December 31, 2014:

Ending balance - total	$	166,728		257,515		846,833		198,577		754,785		43,196		—		2,267,634
Unamortized net deferred loan costs																946
Total non-covered loans															$	2,268,580

Ending balances as of December 31, 2014: Loans

Individually evaluated for impairment	$	784		7,991		24,010		476		20,910		7		—		53,531

Collectively evaluated for impairment	$	165,944		249,524		822,823		198,101		733,228		43,189		—		2,213,456

Loans acquired with deteriorated credit quality	$	—		—		—		—		647		—		—		647

The following table presents the activity in the allowance for loan losses for non-covered loans for the three and six months ended June 30, 2014.

($ in thousands)	Commercial, Financial, and Agricultural		Real Estate – Construction, Land Development, & Other Land Loans		Real Estate – Residential, Farmland, and Multi- family		Real Estate – Home Equity Lines of Credit		Real Estate – Commercial and Other		Consumer		Unallo- cated		Total

As of and for the three months ended June 30, 2014

Beginning balance	8,889		8,650		12,733		3,662		9,375		1,030		367		44,706
Charge-offs	(2,041)		(307)		(861)		(397)		(277)		(371)		-		(4,254)
Recoveries	21		73		114		6		26		116		-		356
Provisions	2,079		(1,002)		(854)		484		88		131		232		1,158
Ending balance	8,948		7,414		11,132		3,755		9,212		906		599		41,966

As of and for the six months ended June 30, 2014

Beginning balance	$	7,432		12,966		15,142		1,838		5,524		1,513		(152)		44,263
Charge-offs		(2,666)		(1,234)		(1,631)		(503)		(889)		(799)		−		(7,722)
Recoveries		49		309		179		11		121		233		−		902
Provisions		4,133		(4,627)		(2,558)		2,409		4,456		(41)		751		4,523
Ending balance	$	8,948		7,414		11,132		3,755		9,212		906		599		41,966

Ending balances as of June 30, 2014: Allowance for loan losses

Individually evaluated for impairment	$	290		818		2,016		—		528		—		—		3,652

Collectively evaluated for impairment	$	8,658		6,596		9,116		3,755		8,684		906		599		38,314

Loans acquired with deteriorated credit quality	$	—		—		—		—		—		—		—		—

Loans receivable as of June 30, 2014:

Ending balance - total	$	178,670		247,369		867,175		200,510		717,905		45,250		—		2,256,879
Unamortized net deferred loan costs																651
Total non-covered loans																2,257,530

Ending balances as of June 30, 2014: Loans

Individually evaluated for impairment	$	679		7,541		22,505		483		17,009		10		—		48,227

Collectively evaluated for impairment	$	177,991		239,828		844,670		200,027		700,896		45,240		—		2,208,652

Loans acquired with deteriorated credit quality	$	—		—		—		—		—		—		—		—

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2015.

($ in thousands)	Covered Loans

As of and for the three months ended June 30, 2015
Beginning balance	$	2,226
Charge-offs		(676	)
Recoveries		545
Provisions		(160	)
Ending balance	$	1,935

As of and for the six months ended June 30, 2015
Beginning balance	$	2,281
Charge-offs		(1,116	)
Recoveries		1,198
Provisions		(428	)
Ending balance	$	1,935

Ending balances as of June 30, 2015: Allowance for loan losses

Individually evaluated for impairment	$	455
Collectively evaluated for impairment		1,434
Loans acquired with deteriorated credit quality		46

Loans receivable as of June 30, 2015:

Ending balance – total	$	113,824

Ending balances as of June 30, 2015: Loans

Individually evaluated for impairment	$	6,763
Collectively evaluated for impairment		105,290
Loans acquired with deteriorated credit quality		1,771

The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2014.

($ in thousands)	Covered Loans

As of and for the year ended December 31, 2014
Beginning balance	$	4,242
Charge-offs		(6,948	)
Recoveries		3,616
Transferred to non-covered		(1,737	)
Provisions		3,108
Ending balance	$	2,281

Ending balances as of December 31, 2014: Allowance for loan losses

Individually evaluated for impairment	$	1,161
Collectively evaluated for impairment		1,046
Loans acquired with deteriorated credit quality		74

Loans receivable as of December 31, 2014:

Ending balance – total	$	127,594

Ending balances as of December 31, 2014: Loans

Individually evaluated for impairment	$	11,484
Collectively evaluated for impairment		114,160
Loans acquired with deteriorated credit quality		1,950

The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2014.

($ in thousands)	Covered Loans

As of and for the three months ended June 30, 2014
Beginning balance	$	3,421
Charge-offs		(2,722	)
Recoveries		630
Provisions		2,501
Ending balance	$	3,830

As of and for the six months ended June 30, 2014
Beginning balance	$	4,242
Charge-offs		(5,670	)
Recoveries		2,547
Provisions		2,711
Ending balance	$	3,830

Ending balances as of June 30, 2014: Allowance for loan losses

Individually evaluated for impairment	$	1,312
Collectively evaluated for impairment		2,472
Loans acquired with deteriorated credit quality		46

Loans receivable as of June 30, 2014:

Ending balance – total	$	176,855

Ending balances as of June 30, 2014: Loans

Individually evaluated for impairment	$	20,615
Collectively evaluated for impairment		153,357
Loans acquired with deteriorated credit quality		2,883

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2015.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	70		84		−		45
Commercial - secured		108		109		−		44
Secured by inventory and accounts receivable		−		−		−		−

Real estate – construction, land development & other land loans		3,483		4,540		−		5,045

Real estate – residential, farmland, and multi-family		9,788		11,017		−		9,575

Real estate – home equity lines of credit		−		−		−		159

Real estate – commercial		15,164		17,279		−		16,800

Consumer		−		−		−		2
Total non-covered impaired loans with no allowance	$	28,613		33,029		−		31,670

Total covered impaired loans with no allowance	$	5,698		10,040		−		6,354

Total impaired loans with no allowance recorded	$	34,311		43,069		−		38,024

Non-covered loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	101		107		46		136
Commercial - secured		485		502		88		558
Secured by inventory and accounts receivable		−		−		−		−

Real estate – construction, land development & other land loans		1,437		3,601		364		1,499

Real estate – residential, farmland, and multi-family		14,045		14,547		1,794		14,215

Real estate – home equity lines of credit		−		−		−		−

Real estate – commercial		2,903		3,008		328		3,237

Consumer		−		−		−		−
Total non-covered impaired loans with allowance	$	18,971		21,765		2,620		19,645

Total covered impaired loans with allowance	$	2,836		3,109		501		4,173

Total impaired loans with an allowance recorded	$	21,807		24,874		3,121		23,818

Interest income recorded on non-covered and covered impaired loans during the year ended June 30, 2015 was insignificant.

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2014.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Non-covered loans with no related allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	33		35		−		20
Commercial - secured		5		6		−		95
Secured by inventory and accounts receivable		−		−		−		−

Real estate – construction, land development & other land loans		6,877		7,944		−		6,430

Real estate – residential, farmland, and multi-family		9,165		10,225		−		7,776

Real estate – home equity lines of credit		476		498		−		388

Real estate – commercial		17,409		20,786		−		11,911

Consumer		7		10		−		7
Total non-covered impaired loans with no allowance	$	33,972		39,504		−		26,627

Total covered impaired loans with no allowance	$	8,097		12,081		−		16,986

Total impaired loans with no allowance recorded	$	42,069		51,585		−		43,613

Non-covered loans with an allowance recorded:
Commercial, financial, and agricultural:
Commercial - unsecured	$	140		143		47		142
Commercial - secured		606		612		164		550
Secured by inventory and accounts receivable		−		−		−		15

Real estate – construction, land development & other land loans		1,114		3,243		415		1,487

Real estate – residential, farmland, and multi-family		14,845		15,257		1,686		14,418

Real estate – home equity lines of credit		−		−		−		4

Real estate – commercial		3,501		3,530		165		6,420

Consumer		−		−		−		8
Total non-covered impaired loans with allowance	$	20,206		22,785		2,477		23,044

Total covered impaired loans with allowance	$	5,220		5,719		1,229		8,513

Total impaired loans with an allowance recorded	$	25,426		28,504		3,706		31,557

Interest income recorded on non-covered and covered impaired loans during the year ended December 31, 2014 was insignificant.

The Company tracks credit quality based on its internal risk ratings. Upon origination a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower's credit score, the loan-to-value ratio, the debt-to-income ratio, etc. Loans that are risk-graded as substandard during the origination process are declined. After loans are initially graded, they are monitored monthly for credit quality based on many factors, such as payment history, the borrower's financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management's evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

The following describes the Company's internal risk grades in ascending order of likelihood of loss:

	Numerical Risk Grade	Description
Pass:
	1	Loans with virtually no risk, including cash secured loans.
	2	Loans with documented significant overall financial strength, including non-cash secured or unsecured loans that have no minor or major exceptions to the lending guidelines.
	3	Loans with documented satisfactory overall financial strength, including non-cash secured or unsecured loans that have no major exceptions to the lending guidelines. If unsecured, loans would include support of a strong guarantor or co-maker.
	4	Loans to borrowers with acceptable financial condition, including non-cash secured or unsecured loans that have minor or major exceptions to the lending guidelines, but the exceptions are properly mitigated. Primary or secondary source of repayment is sufficient and if secured, loan would include the support of a satisfactory guarantor or co-maker.
Watch or Standard:
	9	Existing loans that meet the guidelines for a Risk Graded 5 loan, except the collateral coverage is sufficient to satisfy the debt with no risk of loss under reasonable circumstances.
Special Mention:
	5	Existing loans with major exceptions that cannot be mitigated. Potential for loss is possible.
Classified:
	6	Loans that have a well-defined weakness that may jeopardize the liquidation of the debt if deficiencies are not corrected. Loss is not only possible, but probable.
	7	Loans that have a well-defined weakness that make the collection or liquidation improbable. Loss appears imminent, but the exact amount and timing is uncertain.
	8	Loans that are considered uncollectible and are in the process of being charged-off. This grade is a temporary grade assigned for administrative purposes until the charge-off is completed.

The following table presents the Company's recorded investment in loans by credit quality indicators as of June 30, 2015.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Pass – Acceptable/ Average (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	19,718		20,202		5		1,170		769		210		42,074
Commercial - secured		51,546		57,399		60		3,241		2,647		2,727		117,620
Secured by inventory and accounts receivable		7,721		14,587		−		292		641		86		23,327

Real estate – construction, land development & other land loans		94,263		132,055		723		13,738		9,269		6,387		256,435

Real estate – residential, farmland, and multi-family		215,193		529,845		4,862		40,743		34,373		23,347		848,363

Real estate – home equity lines of credit		125,505		59,684		1,525		5,043		4,353		2,235		198,345

Real estate - commercial		263,746		445,742		8,240		30,392		12,210		8,663		768,993

Consumer		27,913		13,568		53		436		541		468		42,979
Total	$	805,605		1,273,082		15,468		95,055		64,803		44,123		2,298,136
Unamortized net deferred loan costs														819
Total non-covered loans													$	2,298,955

Total covered loans	$	12,014		64,847		323		10,109		19,153		7,378		113,824

Total loans	$	817,619		1,337,929		15,791		105,164		83,956		51,501		2,412,779

At June 30, 2015, there was an insignificant amount of loans that were graded “8” with an accruing status.

The following table presents the Company's recorded investment in loans by credit quality indicators as of December 31, 2014.

($ in thousands)	Credit Quality Indicator (Grouped by Internally Assigned Grade)
	Pass (Grades 1, 2, & 3)		Pass – Acceptable / Average (Grade 4)		Watch or Standard Loans (Grade 9)		Special Mention Loans (Grade 5)		Classified Loans (Grades 6, 7, & 8)		Nonaccrual Loans		Total
Non-covered loans:
Commercial, financial, and agricultural:
Commercial - unsecured	$	17,856		15,649		5		1,356		2,231		187		37,284
Commercial - secured		32,812		62,361		62		4,481		4,331		2,927		106,974
Secured by inventory and accounts receivable		10,815		9,928		−		767		506		454		22,470

Real estate – construction, land development & other land loans		87,806		135,072		771		13,066		12,909		7,891		257,515

Real estate – residential, farmland, and multi-family		221,581		520,790		4,536		40,993		34,474		24,459		846,833

Real estate – home equity lines of credit		122,528		62,642		1,135		5,166		4,533		2,573		198,577

Real estate - commercial		223,197		465,395		9,057		30,318		15,748		11,070		754,785

Consumer		25,520		15,614		54		855		648		505		43,196
Total	$	742,115		1,287,451		15,620		97,002		75,380		50,066		2,267,634
Unamortized net deferred loan costs														946
Total non-covered loans													$	2,268,580

Total covered loans	$	14,349		70,989		632		10,503		20,613		10,508		127,594

Total loans	$	756,464		1,358,440		16,252		107,505		95,993		60,574		2,396,174

At December 31, 2014, there was an insignificant amount of loans that were graded “8” with an accruing status.

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 creditor has granted a concession. Concessions may include interest rate reductions or below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses.

The vast majority of the Company's troubled debt restructurings modified during the periods ended June 30, 2015 and 2014 related to interest rate reductions combined with restructured amortization schedules. The Company does not generally grant principal forgiveness.

All loans classified as troubled debt restructurings are considered to be impaired and are evaluated as such for determination of the allowance for loan losses. The Company's troubled debt restructurings can be classified as either nonaccrual or accruing based on the loan's payment status. The troubled debt restructurings that are nonaccrual are reported within the nonaccrual loan totals presented previously.

The following table presents information related to loans modified in a troubled debt restructuring during the three months ended June 30, 2015 and 2014.

($ in thousands)	For the three months ended						For the three months ended
	June 30, 2015						June 30, 2014
	Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances		Number of Contracts		Pre-Modification Restructured Balances		Post-Modification Restructured Balances
Non-covered TDRs – Accruing
Commercial, financial, and agricultural:
Commercial – unsecured		1	$	8	$	8		—	$	—	$	—
Commercial – secured		—		—		—		—		—		—
Secured by inventory and accounts receivable		—		—		—		—		—		—
Real estate – construction, land development & other land loans		—		—		—		—		—		—
Real estate – residential, farmland, and multi-family		1		152		152		5		411		411
Real estate – home equity lines of credit		—		—		—		—		—		—
Real estate – commercial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Non-covered TDRs – Nonaccrual
Commercial, financial, and agricultural:
Commercial – unsecured		—		—		—		—		—		—
Commercial – secured		—		—		—		—		—		—
Secured by inventory and accounts receivable		—		—		—		—		—		—
Real estate – construction, land development & other land loans		—		—		—		—		—		—
Real estate – residential, farmland, and multi-family		—		—		—		2		332		332
Real estate – home equity lines of credit		—		—		—		—		—		—
Real estate – commercial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Total non-covered TDRs arising during period		2		160		160		7		743		743

Total covered TDRs arising during period – Accruing		—	$	—	$	—		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		—		—		—		—		—		—

Total TDRs arising during period		2	$	160	$	160		9	$	991	$	988

The following table presents information related to loans modified in a troubled debt restructuring during the six months ended June 30, 2015 and 2014.

($ in thousands)	For the six months ended June 30, 2015						For the six months ended June 30, 2014
	Number of Contracts		Pre- Modification Restructured Balances		Post- Modification Restructured Balances		Number of Contracts		Pre- Modification Restructured Balances		Post- Modification Restructured Balances
Non-covered TDRs – Accruing
Commercial, financial, and agricultural:
Commercial – unsecured		1	$	8	$	8		—	$	—	$	—
Commercial – secured		—		—		—		—		—		—
Secured by inventory and accounts receivable		—		—		—		—		—		—
Real estate – construction, land development & other land loans		—		—		—		—		—		—
Real estate – residential, farmland, and multi-family		2		265		265		7		748		748
Real estate – home equity lines of credit		—		—		—		—		—		—
Real estate – commercial		1		51		51		—		—		—
Consumer		—		—		—		—		—		—

Non-covered TDRs – Nonaccrual
Commercial, financial, and agricultural:
Commercial – unsecured		—		—		—		—		—		—
Commercial – secured		—		—		—		—		—		—
Secured by inventory and accounts receivable		—		—		—		—		—		—
Real estate – construction, land development & other land loans								—		—		—
Real estate – residential, farmland, and multi-family		4		305		305		4		438		438
Real estate – home equity lines of credit		—		—		—		—		—		—
Real estate – commercial		—		—		—		—		—		—
Consumer		—		—		—		—		—		—

Total non-covered TDRs arising during period		8		629		629		11		1,186		1,186

Total covered TDRs arising during period– Accruing		2	$	139	$	139		2	$	248	$	245
Total covered TDRs arising during period – Nonaccrual		—		—		—		5		710		682

Total TDRs arising during period		10	$	768	$	768		18	$	2,144	$	2,113

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three months ended June 30, 2015 and 2014 are presented in the table below. The Company considers a loan to have defaulted when it becomes 90 or more days delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to foreclosed real estate.

($ in thousands)	For the three months ended				For the three months ended
	June 30, 2015				June 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Non-covered accruing TDRs that subsequently defaulted
Commercial, financial, and agricultural:
Commercial – unsecured		1		7		—		—
Real estate – construction, land development & other land loans		—	$	—		—	$	—
Real estate – residential, farmland, and multi-family		-		-		—		—
Real estate – commercial		—		—		—		—

Total non-covered TDRs that subsequently defaulted		1	$	7		—	$	—

Total accruing covered TDRs that subsequently defaulted		—	$	—		—	$	—

Total accruing TDRs that subsequently defaulted		1	$	7		—	$	—

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the six months ended June 30, 2015 and 2014 are presented in the table below.

($ in thousands)	For the six months ended June 30, 2015				For the six months ended June 30, 2014
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Non-covered accruing TDRs that subsequently defaulted
Commercial, financial, and agricultural:
Commercial – unsecured		1	$	7		—	$	—
Real estate – construction, land development & other land loans		—		—		1		5
Real estate – residential, farmland, and multi-family		1		34		—		—
Real estate – commercial		—		—		1		71

Total non-covered TDRs that subsequently defaulted		2	$	41		2	$	76

Total accruing covered TDRs that subsequently defaulted		—	$	—		—	$	—

Total accruing TDRs that subsequently defaulted		2	$	41		2	$	76