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Loans and Asset Quality Information | 6 Months Ended
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Jun. 30, 2016
Loans and Asset Quality Information [Abstract] |
Loans and Asset Quality Information | Note 7 – Loans and Asset Quality Information Certain 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, the loss share provisions associated with non-single family assets associated with the 2009 failed bank acquisition of Cooperative Bank expired, and the associated assets were reclassified as non-covered. On April 1, 2016, the loss share provisions of another agreement expired, which related to the non-single family assets of The Bank of Asheville, a failed bank acquisition from January 2011. Accordingly, the remaining balances associated with those loans and foreclosed real estate were reclassified from the covered portfolio to the non-covered portfolio on April 1, 2016. The Company bears 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 $17.7 million and the foreclosed real estate in this portfolio had a carrying value of $1.2 million. Of the $17.7 million in loans that lost loss share protection, approximately $2.8 million were on nonaccrual status as of April 1, 2016. Additionally, approximately $0.3 million in allowance for loan losses associated with this portfolio of loans was transferred to the allowance for loan losses for non-covered loans on April 1, 2016. The following is a summary of the major categories of total loans outstanding:
($ in thousands) |  | June 30, 2016 |  |  | December 31, 2015 |  |  | June 30, 2015 |
|  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |
All loans (non-covered and covered): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 244,862 |  |  |  | 9% |  |  | $ | 202,671 |  |  |  | 8% |  |  | $ | 179,909 |  |  |  | 7% |
Real estate – construction, land development & other land loans |  |  | 310,993 |  |  |  | 12% |  |  |  | 308,969 |  |  |  | 12% |  |  |  | 282,262 |  |  |  | 12% |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 751,446 |  |  |  | 29% |  |  |  | 768,559 |  |  |  | 31% |  |  |  | 777,515 |  |  |  | 32% |
Real estate – mortgage – home equity loans / lines of credit |  |  | 238,794 |  |  |  | 9% |  |  |  | 232,601 |  |  |  | 9% |  |  |  | 220,534 |  |  |  | 9% |
Real estate – mortgage – commercial and other |  |  | 1,000,578 |  |  |  | 39% |  |  |  | 957,587 |  |  |  | 38% |  |  |  | 904,496 |  |  |  | 38% |
Installment loans to individuals |  |  | 50,387 |  |  |  | 2% |  |  |  | 47,666 |  |  |  | 2% |  |  |  | 47,244 |  |  |  | 2% |
Subtotal |  |  | 2,597,060 |  |  |  | 100% |  |  |  | 2,518,053 |  |  |  | 100% |  |  |  | 2,411,960 |  |  |  | 100% |
Unamortized net deferred loan costs |  |  | 1,074 |  |  |  |  |  |  |  | 873 |  |  |  |  |  |  |  | 819 |  |  |  |  |
Total loans |  | $ | 2,598,134 |  |  |  |  |  |  | $ | 2,518,926 |  |  |  |  |  |  | $ | 2,412,779 |  |  |  |  |
The following is a summary of the major categories of non-covered loans outstanding:
($ in thousands) |  | June 30, 2016 |  |  | December 31, 2015 |  |  | June 30, 2015 |
|  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |
Non-covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 244,862 |  |  |  | 10% |  |  | $ | 201,798 |  |  |  | 8% |  |  | $ | 178,756 |  |  |  | 8% |
Real estate – construction, land development & other land loans |  |  | 310,832 |  |  |  | 12% |  |  |  | 305,228 |  |  |  | 13% |  |  |  | 278,406 |  |  |  | 12% |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 683,367 |  |  |  | 27% |  |  |  | 692,902 |  |  |  | 29% |  |  |  | 694,794 |  |  |  | 30% |
Real estate – mortgage – home equity loans / lines of credit |  |  | 228,906 |  |  |  | 9% |  |  |  | 221,995 |  |  |  | 9% |  |  |  | 208,778 |  |  |  | 9% |
Real estate – mortgage – commercial and other |  |  | 1,000,319 |  |  |  | 40% |  |  |  | 945,823 |  |  |  | 39% |  |  |  | 890,158 |  |  |  | 39% |
Installment loans to individuals |  |  | 50,387 |  |  |  | 2% |  |  |  | 47,666 |  |  |  | 2% |  |  |  | 47,244 |  |  |  | 2% |
Subtotal |  |  | 2,518,673 |  |  |  | 100% |  |  |  | 2,415,412 |  |  |  | 100% |  |  |  | 2,298,136 |  |  |  | 100% |
Unamortized net deferred loan costs |  |  | 1,074 |  |  |  |  |  |  |  | 873 |  |  |  |  |  |  |  | 819 |  |  |  |  |
Total non-covered loans |  | $ | 2,519,747 |  |  |  |  |  |  | $ | 2,416,285 |  |  |  |  |  |  | $ | 2,298,955 |  |  |  |  |
The carrying amount of the covered loans at June 30, 2016 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 |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – construction, land development & other land loans |  |  | — |  |  |  | — |  |  |  | 161 |  |  |  | 162 |  |  |  | 161 |  |  |  | 162 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | — |  |  |  | 33 |  |  |  | 68,079 |  |  |  | 78,940 |  |  |  | 68,079 |  |  |  | 78,973 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 6 |  |  |  | 14 |  |  |  | 9,882 |  |  |  | 11,140 |  |  |  | 9,888 |  |  |  | 11,154 |
Real estate – mortgage – commercial and other |  |  | — |  |  |  | — |  |  |  | 259 |  |  |  | 294 |  |  |  | 259 |  |  |  | 294 |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 6 |  |  |  | 47 |  |  |  | 78,381 |  |  |  | 90,536 |  |  |  | 78,387 |  |  |  | 90,583 |
The carrying amount of the covered loans at December 31, 2015 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 |  | $ | — |  |  |  | — |  |  |  | 873 |  |  |  | 886 |  |  |  | 873 |  |  |  | 886 |
Real estate – construction, land development & other land loans |  |  | 277 |  |  |  | 365 |  |  |  | 3,464 |  |  |  | 3,457 |  |  |  | 3,741 |  |  |  | 3,822 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 102 |  |  |  | 633 |  |  |  | 75,555 |  |  |  | 88,434 |  |  |  | 75,657 |  |  |  | 89,067 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 7 |  |  |  | 14 |  |  |  | 10,599 |  |  |  | 12,099 |  |  |  | 10,606 |  |  |  | 12,113 |
Real estate – mortgage – commercial and other |  |  | 1,003 |  |  |  | 3,136 |  |  |  | 10,761 |  |  |  | 11,458 |  |  |  | 11,764 |  |  |  | 14,594 |
Total |  | $ | 1,389 |  |  |  | 4,148 |  |  |  | 101,252 |  |  |  | 116,334 |  |  |  | 102,641 |  |  |  | 120,482 |
The following table presents information regarding covered purchased nonimpaired loans since December 31, 2014. 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, 2014 |  | $ | 125,644 |
Principal repayments |  |  | (30,238 | )
Transfers to foreclosed real estate |  |  | (1,211 | )
Net loan (charge-offs) / recoveries |  |  | 2,306 |
Accretion of loan discount |  |  | 4,751 |
Carrying amount of nonimpaired covered loans at December 31, 2015 |  |  | 101,252 |
Principal repayments |  |  | (7,997 | )
Transfers to foreclosed real estate |  |  | (1,036 | )
Transfer to non-covered loans due to expiration of loss-share agreement |  |  | (17,530 | )
Net loan (charge-offs) / recoveries |  |  | 1,784 |
Accretion of loan discount |  |  | 1,908 |
Carrying amount of nonimpaired covered loans at June 30, 2016 |  | $ | 78,381 |
As reflected in the table above, the Company accreted $1,908,000 of the loan discount on covered purchased nonimpaired loans into interest income during the first six months of 2016. As of June 30, 2016, there was remaining loan discount of $11,179,000 related to covered 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, 2016, the Company also had $581,000 of loan discount related to covered 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. Also, the Company accreted $43,000 of loan discount on non-covered purchased nonimpaired loans into interest income during the first six months of 2016. As of June 30, 2016, there was a remaining loan discount of $208,000 related to non-covered purchased accruing loans, which will be accreted into interest income over the lives of the respective loans. At June 30, 2016, the Company also had $391,000 of loan discount related to non-covered purchased nonaccruing loans, which the Company does not expect will be accreted into income. The following table presents information regarding all purchased impaired loans since December 31, 2014, the majority of which are covered loans. The Company has applied the cost recovery method to all purchased impaired loans at their respective acquisition dates due to the uncertainty as to the timing of expected cash flows, as reflected in the following table.
($ in thousands) Purchased Impaired Loans |  | Contractual Principal Receivable |  |  | Fair Market Value Adjustment – Write Down (Nonaccretable Difference) |  |  | Carrying Amount |
Balance at December 31, 2014 |  | $ | 5,859 |  |  |  | 3,262 |  |  |  | 2,597 |
Change due to payments received |  |  | (634 | ) |  |  | (102 | ) |  |  | (532 | )
Transfer to foreclosed real estate |  |  | (431 | ) |  |  | (336 | ) |  |  | (95 | )
Other |  |  | (3 | ) |  |  | (3 | ) |  |  | — |
Balance at December 31, 2015 |  | $ | 4,791 |  |  |  | 2,821 |  |  |  | 1,970 |
Change due to payments received |  |  | (3,392 | ) |  |  | (2,253 | ) |  |  | (1,139 | )
Change due to loan charge-off |  |  | (394 | ) |  |  | (324 | ) |  |  | (70 | )
Balance at June 30, 2016 |  | $ | 1,005 |  |  |  | 244 |  |  |  | 761 |
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 three months ended 2016, the Company received $1,062,000 in payments that exceeded the carrying amount of the related purchased impaired loans, of which $741,000 was recognized as discount accretion loan interest income and $321,000 was recorded as additional loan interest income. For the six month period ended June 30, 2016, the Company received $1,108,000 in payments that exceeded the carrying amount of the related purchased impaired loans, of which $780,000 was recognized as discount accretion loan interest income and $328,000 was recorded as additional loan interest income. No such excess payments were received in the first six months of 2015. Nonperforming assets are defined as nonaccrual loans, restructured loans, loans past due 90 or more days and still accruing interest, nonperforming loans held for sale, and foreclosed real estate. Nonperforming assets are summarized as follows:
ASSET QUALITY DATA ($ in thousands) |  | June 30, 2016 |  |  | December 31, 2015 |  |  | June 30, 2015 |
Non-covered nonperforming assets |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 33,781 |  |  | $ | 39,994 |  |  | $ | 44,123 |
Restructured loans - accruing |  |  | 25,826 |  |  |  | 28,011 |  |  |  | 32,059 |
Accruing loans > 90 days past due |  |  | — |  |  |  | — |  |  |  | — |
Total non-covered nonperforming loans |  |  | 59,607 |  |  |  | 68,005 |  |  |  | 76,182 |
Foreclosed real estate |  |  | 10,221 |  |  |  | 9,188 |  |  |  | 9,954 |
Total non-covered nonperforming assets |  | $ | 69,828 |  |  | $ | 77,193 |  |  | $ | 86,136 |
Covered nonperforming assets |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans (1) |  | $ | 4,194 |  |  | $ | 7,816 |  |  | $ | 7,378 |
Restructured loans - accruing |  |  | 3,445 |  |  |  | 3,478 |  |  |  | 3,910 |
Accruing loans > 90 days past due |  |  | — |  |  |  | — |  |  |  | — |
Total covered nonperforming loans |  |  | 7,639 |  |  |  | 11,294 |  |  |  | 11,288 |
Foreclosed real estate |  |  | 385 |  |  |  | 806 |  |  |  | 1,945 |
Total covered nonperforming assets |  | $ | 8,024 |  |  | $ | 12,100 |  |  | $ | 13,233 |
Total nonperforming assets |  | $ | 77,852 |  |  | $ | 89,293 |  |  | $ | 99,369 |
(1) At June 30, 2016, December 31, 2015, and June 30, 2015, the contractual balance of the nonaccrual loans covered by FDIC loss share agreements was $5.0 million, $12.3 million, and $12.7 million, respectively. At June 30, 2016 and 2015, the Company had $1.8 million and $5.1 million in residential mortgage loans in process of foreclosure, respectively. The following table presents the Company’s nonaccrual loans as of June 30, 2016.
($ in thousands) |  | Non-covered |  |  | Covered |  |  | Total |
Commercial, financial, and agricultural |  | $ | 2,870 |  |  |  | — |  |  |  | 2,870 |
Real estate – construction, land development & other land loans |  |  | 4,154 |  |  |  | — |  |  |  | 4,154 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 17,315 |  |  |  | 3,841 |  |  |  | 21,156 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 2,406 |  |  |  | 353 |  |  |  | 2,759 |
Real estate – mortgage – commercial and other |  |  | 6,821 |  |  |  | — |  |  |  | 6,821 |
Installment loans to individuals |  |  | 215 |  |  |  | — |  |  |  | 215 |
Total |  | $ | 33,781 |  |  |  | 4,194 |  |  |  | 37,975 |
The following table presents the Company’s nonaccrual loans as of December 31, 2015.
($ in thousands) |  | Non-covered |  |  | Covered |  |  | Total |
Commercial, financial, and agricultural |  | $ | 2,964 |  |  |  | — |  |  |  | 2,964 |
Real estate – construction, land development & other land loans |  |  | 4,652 |  |  |  | 52 |  |  |  | 4,704 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 18,822 |  |  |  | 5,007 |  |  |  | 23,829 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 3,142 |  |  |  | 383 |  |  |  | 3,525 |
Real estate – mortgage – commercial and other |  |  | 10,197 |  |  |  | 2,374 |  |  |  | 12,571 |
Installment loans to individuals |  |  | 217 |  |  |  | — |  |  |  | 217 |
Total |  | $ | 39,994 |  |  |  | 7,816 |  |  |  | 47,810 |
The following table presents an analysis of the payment status of the Company’s loans as of June 30, 2016.
($ 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 |  | $ | 195 |  |  |  | 1,643 |  |  |  | 2,870 |  |  |  | 240,154 |  |  |  | 244,862 |
Real estate – construction, land development & other land loans |  |  | 961 |  |  |  | 203 |  |  |  | 4,154 |  |  |  | 305,514 |  |  |  | 310,832 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 2,574 |  |  |  | 763 |  |  |  | 17,315 |  |  |  | 662,715 |  |  |  | 683,367 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 765 |  |  |  | 221 |  |  |  | 2,406 |  |  |  | 225,514 |  |  |  | 228,906 |
Real estate – mortgage – commercial and other |  |  | 1,998 |  |  |  | 373 |  |  |  | 6,821 |  |  |  | 991,127 |  |  |  | 1,000,319 |
Installment loans to individuals |  |  | 368 |  |  |  | 253 |  |  |  | 215 |  |  |  | 49,551 |  |  |  | 50,387 |
Total non-covered |  | $ | 6,861 |  |  |  | 3,456 |  |  |  | 33,781 |  |  |  | 2,474,575 |  |  |  | 2,518,673 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,074 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,519,747 |
Covered loans |  | $ | 172 |  |  |  | 1,473 |  |  |  | 4,194 |  |  |  | 72,548 |  |  |  | 78,387 |
Total loans |  | $ | 7,033 |  |  |  | 4,929 |  |  |  | 37,975 |  |  |  | 2,547,123 |  |  |  | 2,598,134 |
The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at June 30, 2016. The following table presents an analysis of the payment status of the Company’s loans as of December 31, 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 |  | $ | 999 |  |  |  | 127 |  |  |  | 2,964 |  |  |  | 197,708 |  |  |  | 201,798 |
Real estate – construction, land development & other land loans |  |  | 1,512 |  |  |  | 429 |  |  |  | 4,652 |  |  |  | 298,635 |  |  |  | 305,228 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 12,130 |  |  |  | 3,212 |  |  |  | 18,822 |  |  |  | 658,738 |  |  |  | 692,902 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 1,276 |  |  |  | 105 |  |  |  | 3,142 |  |  |  | 217,472 |  |  |  | 221,995 |
Real estate – mortgage – commercial and other |  |  | 5,591 |  |  |  | 864 |  |  |  | 10,197 |  |  |  | 929,171 |  |  |  | 945,823 |
Installment loans to individuals |  |  | 278 |  |  |  | 255 |  |  |  | 217 |  |  |  | 46,916 |  |  |  | 47,666 |
Total non-covered |  | $ | 21,786 |  |  |  | 4,992 |  |  |  | 39,994 |  |  |  | 2,348,640 |  |  |  | 2,415,412 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 873 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,416,285 |
Covered loans |  | $ | 3,313 |  |  |  | 402 |  |  |  | 7,816 |  |  |  | 91,110 |  |  |  | 102,641 |
Total loans |  | $ | 25,099 |  |  |  | 5,394 |  |  |  | 47,810 |  |  |  | 2,439,750 |  |  |  | 2,518,926 |
The Company had no non-covered or covered loans that were past due greater than 90 days and accruing interest at December 31, 2015. 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, 2016.
($ in thousands) |  | Commercial, Financial, and Agricultural |  |  | Real Estate – Construction, Land Development, & Other Land Loans |  |  | Real Estate – Residential (1-4 Family) First Mortgages |  |  | Real Estate – Mortgage – Home Equity Lines of Credit |  |  | Real Estate – Mortgage – Commercial and Other |  |  | Installment Loans to Individuals |  |  | Unallo- cated |  |  | Total |
As of and for the three months ended June 30, 2016
Beginning balance |  | $ | 4,679 |  |  |  | 3,345 |  |  |  | 7,374 |  |  |  | 2,267 |  |  |  | 5,940 |  |  |  | 1,202 |  |  |  | 442 |  |  |  | 25,249 |
Charge-offs |  |  | (57 | ) |  |  | (137 | ) |  |  | (740 | ) |  |  | (285 | ) |  |  | (396 | ) |  |  | (238 | ) |  |  | — |  |  |  | (1,853 | )
Recoveries |  |  | 216 |  |  |  | 121 |  |  |  | 61 |  |  |  | 64 |  |  |  | 155 |  |  |  | 140 |  |  |  | — |  |  |  | 757 |
Transfer from covered category |  |  | 56 |  |  |  | 62 |  |  |  | 51 |  |  |  | 12 |  |  |  | 126 |  |  |  | — |  |  |  | — |  |  |  | 307 |
Provisions |  |  | (612 | ) |  |  | (492 | ) |  |  | 1,114 |  |  |  | 227 |  |  |  | (254 | ) |  |  | 376 |  |  |  | 130 |  |  |  | 489 |
Ending balance |  | $ | 4,282 |  |  |  | 2,899 |  |  |  | 7,860 |  |  |  | 2,285 |  |  |  | 5,571 |  |  |  | 1,480 |  |  |  | 572 |  |  |  | 24,949 |
As of and for the six months ended June 30, 2016
Beginning balance |  | $ | 4,742 |  |  |  | 3,754 |  |  |  | 7,832 |  |  |  | 2,893 |  |  |  | 5,816 |  |  |  | 1,051 |  |  |  | 696 |  |  |  | 26,784 |
Charge-offs |  |  | (734 | ) |  |  | (477 | ) |  |  | (2,691 | ) |  |  | (734 | ) |  |  | (562 | ) |  |  | (518 | ) |  |  | — |  |  |  | (5,716 | )
Recoveries |  |  | 302 |  |  |  | 211 |  |  |  | 295 |  |  |  | 119 |  |  |  | 285 |  |  |  | 253 |  |  |  | — |  |  |  | 1,465 |
Transfer from covered category |  |  | 56 |  |  |  | 62 |  |  |  | 51 |  |  |  | 12 |  |  |  | 126 |  |  |  | — |  |  |  | — |  |  |  | 307 |
Provisions |  |  | (84 | ) |  |  | (651 | ) |  |  | 2,373 |  |  |  | (5 | ) |  |  | (94 | ) |  |  | 694 |  |  |  | (124 | ) |  |  | 2,109 |
Ending balance |  | $ | 4,282 |  |  |  | 2,899 |  |  |  | 7,860 |  |  |  | 2,285 |  |  |  | 5,571 |  |  |  | 1,480 |  |  |  | 572 |  |  |  | 24,949 |
Ending balances as of June 30, 2016: Allowance for loan losses
Individually evaluated for impairment |  | $ | 14 |  |  |  | 172 |  |  |  | 1,263 |  |  |  | 11 |  |  |  | 478 |  |  |  | 70 |  |  |  | — |  |  |  | 2,008 |
Collectively evaluated for impairment |  | $ | 4,268 |  |  |  | 2,727 |  |  |  | 6,597 |  |  |  | 2,274 |  |  |  | 5,093 |  |  |  | 1,410 |  |  |  | 572 |  |  |  | 22,941 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans receivable as of June 30, 2016:
Ending balance – total |  | $ | 244,862 |  |  |  | 310,832 |  |  |  | 683,367 |  |  |  | 228,906 |  |  |  | 1,000,319 |  |  |  | 50,387 |  |  |  | — |  |  |  | 2,518,673 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,074 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,519,747 |
Ending balances as of June 30, 2016: Loans
Individually evaluated for impairment |  | $ | 859 |  |  |  | 4,614 |  |  |  | 20,201 |  |  |  | 383 |  |  |  | 12,845 |  |  |  | 72 |  |  |  | — |  |  |  | 38,974 |
Collectively evaluated for impairment |  | $ | 244,003 |  |  |  | 306,218 |  |  |  | 662,959 |  |  |  | 228,523 |  |  |  | 986,926 |  |  |  | 50,315 |  |  |  | — |  |  |  | 2,478,944 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | 207 |  |  |  | — |  |  |  | 548 |  |  |  | — |  |  |  | — |  |  |  | 755 |
The following table presents the activity in the allowance for loan losses for non-covered loans for the year ended December 31, 2015.
($ in thousands) |  | Commercial, Financial, and Agricultural |  |  | Real Estate – Construction, Land Development, & Other Land Loans |  |  | Real Estate – Residential (1-4 Family) First Mortgages |  |  | Real Estate – Mortgage – Home Equity Lines of Credit |  |  | Real Estate – Mortgage – Commercial and Other |  |  | Installment Loans to Individuals |  |  | Unallo- cated |  |  | Total |
As of and for the year ended December 31, 2015
Beginning balance |  | $ | 6,769 |  |  |  | 8,158 |  |  |  | 10,136 |  |  |  | 4,753 |  |  |  | 6,466 |  |  |  | 1,916 |  |  |  | 147 |  |  |  | 38,345 |
Charge-offs |  |  | (2,908 | ) |  |  | (3,034 | ) |  |  | (4,904 | ) |  |  | (1,054 | ) |  |  | (2,804 | ) |  |  | (2,411 | ) |  |  | — |  |  |  | (17,115 | )
Recoveries |  |  | 831 |  |  |  | 998 |  |  |  | 279 |  |  |  | 121 |  |  |  | 904 |  |  |  | 413 |  |  |  | — |  |  |  | 3,546 |
Provisions |  |  | 50 |  |  |  | (2,368 | ) |  |  | 2,321 |  |  |  | (927 | ) |  |  | 1,250 |  |  |  | 1,133 |  |  |  | 549 |  |  |  | 2,008 |
Ending balance |  | $ | 4,742 |  |  |  | 3,754 |  |  |  | 7,832 |  |  |  | 2,893 |  |  |  | 5,816 |  |  |  | 1,051 |  |  |  | 696 |  |  |  | 26,784 |
Ending balances as of December 31, 2015: Allowance for loan losses
Individually evaluated for impairment |  | $ | 304 |  |  |  | 241 |  |  |  | 1,440 |  |  |  | 321 |  |  |  | 336 |  |  |  | 45 |  |  |  | — |  |  |  | 2,687 |
Collectively evaluated for impairment |  | $ | 4,438 |  |  |  | 3,513 |  |  |  | 6,392 |  |  |  | 2,572 |  |  |  | 5,480 |  |  |  | 1,006 |  |  |  | 696 |  |  |  | 24,097 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans receivable as of December 31, 2015:
Ending balance – total |  | $ | 201,798 |  |  |  | 305,228 |  |  |  | 692,902 |  |  |  | 221,995 |  |  |  | 945,823 |  |  |  | 47,666 |  |  |  | — |  |  |  | 2,415,412 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 873 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,416,285 |
Ending balances as of December 31, 2015: Loans
Individually evaluated for impairment |  | $ | 992 |  |  |  | 4,898 |  |  |  | 21,325 |  |  |  | 758 |  |  |  | 16,605 |  |  |  | 76 |  |  |  | — |  |  |  | 44,654 |
Collectively evaluated for impairment |  | $ | 200,806 |  |  |  | 300,330 |  |  |  | 671,577 |  |  |  | 221,237 |  |  |  | 928,637 |  |  |  | 47,590 |  |  |  | — |  |  |  | 2,370,177 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 581 |  |  |  | — |  |  |  | — |  |  |  | 581 |
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 (1-4 Family) First Mortgages |  |  | Real Estate – Mortgage – Home Equity Lines of Credit |  |  | Real Estate – Mortgage – Commercial and Other |  |  | Installment Loans to Individuals |  |  | Unallo- cated |  |  | Total |
As of and for the three months ended June 30, 2015
Beginning balance |  | $ | 5,738 |  |  |  | 7,144 |  |  |  | 9,327 |  |  |  | 3,983 |  |  |  | 5,709 |  |  |  | 1,565 |  |  |  | 304 |  |  |  | 33,770 |
Charge-offs |  |  | (1,407 | ) |  |  | (702 | ) |  |  | (818 | ) |  |  | (522 | ) |  |  | (1,026 | ) |  |  | (928 | ) |  |  | — |  |  |  | (5,403 | )
Recoveries |  |  | 256 |  |  |  | 52 |  |  |  | 146 |  |  |  | 37 |  |  |  | 193 |  |  |  | 103 |  |  |  | — |  |  |  | 787 |
Provisions |  |  | 800 |  |  |  | (1,067 | ) |  |  | (573 | ) |  |  | (115 | ) |  |  | 788 |  |  |  | 376 |  |  |  | 792 |  |  |  | 1,001 |
Ending balance |  | $ | 5,387 |  |  |  | 5,427 |  |  |  | 8,082 |  |  |  | 3,383 |  |  |  | 5,664 |  |  |  | 1,116 |  |  |  | 1,096 |  |  |  | 30,155 |
As of and for the six months ended June 30, 2015
Beginning balance |  | $ | 6,769 |  |  |  | 8,158 |  |  |  | 10,136 |  |  |  | 4,753 |  |  |  | 6,466 |  |  |  | 1,916 |  |  |  | 147 |  |  |  | 38,345 |
Charge-offs |  |  | (2,301 | ) |  |  | (2,008 | ) |  |  | (2,257 | ) |  |  | (597 | ) |  |  | (2,022 | ) |  |  | (1,578 | ) |  |  | — |  |  |  | (10,763 | )
Recoveries |  |  | 343 |  |  |  | 318 |  |  |  | 159 |  |  |  | 58 |  |  |  | 395 |  |  |  | 195 |  |  |  | — |  |  |  | 1,468 |
Provisions |  |  | 576 |  |  |  | (1,041 | ) |  |  | 44 |  |  |  | (831 | ) |  |  | 825 |  |  |  | 583 |  |  |  | 949 |  |  |  | 1,105 |
Ending balance |  | $ | 5,387 |  |  |  | 5,427 |  |  |  | 8,082 |  |  |  | 3,383 |  |  |  | 5,664 |  |  |  | 1,116 |  |  |  | 1,096 |  |  |  | 30,155 |
Ending balances as of June 30, 2015: Allowance for loan losses
Individually evaluated for impairment |  | $ | 88 |  |  |  | 393 |  |  |  | 1,458 |  |  |  | 75 |  |  |  | 560 |  |  |  | 46 |  |  |  | — |  |  |  | 2,620 |
Collectively evaluated for impairment |  | $ | 5,299 |  |  |  | 5,034 |  |  |  | 6,624 |  |  |  | 3,308 |  |  |  | 5,104 |  |  |  | 1,070 |  |  |  | 1,096 |  |  |  | 27,535 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Loans receivable as of June 30, 2015:
Ending balance – total |  | $ | 178,756 |  |  |  | 278,406 |  |  |  | 694,794 |  |  |  | 208,778 |  |  |  | 890,158 |  |  |  | 47,244 |  |  |  | — |  |  |  | 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 |  | $ | 686 |  |  |  | 5,377 |  |  |  | 19,847 |  |  |  | 527 |  |  |  | 20,454 |  |  |  | 79 |  |  |  | — |  |  |  | 46,970 |
Collectively evaluated for impairment |  | $ | 178,070 |  |  |  | 273,029 |  |  |  | 674,947 |  |  |  | 208,251 |  |  |  | 869,090 |  |  |  | 47,165 |  |  |  | — |  |  |  | 2,250,552 |
Loans acquired with deteriorated credit quality |  | $ | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 614 |  |  |  | — |  |  |  | — |  |  |  | 614 |
The following table presents the activity in the allowance for loan losses for covered loans for the three and six months ended June 30, 2016.
($ in thousands) |  | Covered Loans |
As of and for the three months ended June 30, 2016
Beginning balance |  | $ | 1,399 |
Charge-offs |  |  | (4 | )
Recoveries |  |  | 756 |
Transferred to non-covered |  |  | (307 | )
Provisions (reversal) for loan losses |  |  | (770 | )
Ending balance |  | $ | 1,074 |
As of and for the six months ended June 30, 2016 |  |  |  |
Beginning balance |  | $ | 1,799 |
Charge-offs |  |  | (245 | )
Recoveries |  |  | 1,959 |
Transferred to non-covered |  |  | (307 | )
Provisions (reversal) for loan losses |  |  | (2,132 | )
Ending balance |  | $ | 1,074 |
Ending balances as of June 30, 2016: Allowance for loan losses
Individually evaluated for impairment |  | $ | 443 |
Collectively evaluated for impairment |  |  | 631 |
Loans acquired with deteriorated credit quality |  |  | — |
Loans receivable as of June 30, 2016:
Ending balance – total |  | $ | 78,387 |
Ending balances as of June 30, 2016: Loans
Individually evaluated for impairment |  | $ | 5,500 |
Collectively evaluated for impairment |  |  | 72,881 |
Loans acquired with deteriorated credit quality |  |  | 6 |
The following table presents the activity in the allowance for loan losses for covered loans for the year ended December 31, 2015.
($ in thousands) |  | Covered Loans |
As of and for the year ended December 31, 2015
Beginning balance |  | $ | 2,281 |
Charge-offs |  |  | (1,316 | )
Recoveries |  |  | 3,622 |
Provision (reversal) for loan losses |  |  | (2,788 | )
Ending balance |  | $ | 1,799 |
Ending balances as of December 31, 2015: Allowance for loan losses
Individually evaluated for impairment |  | $ | 554 |
Collectively evaluated for impairment |  |  | 1,175 |
Loans acquired with deteriorated credit quality |  |  | 70 |
Loans receivable as of December 31, 2015:
Ending balance – total |  | $ | 102,641 |
Ending balances as of December 31, 2015: Loans
Individually evaluated for impairment |  | $ | 7,055 |
Collectively evaluated for impairment |  |  | 94,197 |
Loans acquired with deteriorated credit quality |  |  | 1,389 |
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 (reversal) for loan losses |  |  | (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 (reversal) for loan losses |  |  | (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 loans individually evaluated for impairment as of June 30, 2016.
($ in thousands) |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |  |  | Average Recorded Investment |
Non-covered loans with no related allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 766 |  |  |  | 845 |  |  |  | — |  |  |  | 604 |
Real estate – mortgage – construction, land development & other land loans |  |  | 3,764 |  |  |  | 7,420 |  |  |  | — |  |  |  | 3,863 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 9,137 |  |  |  | 10,634 |  |  |  | — |  |  |  | 8,690 |
Real estate – mortgage –home equity loans / lines of credit |  |  | 145 |  |  |  | 203 |  |  |  | — |  |  |  | 139 |
Real estate – mortgage –commercial and other |  |  | 8,536 |  |  |  | 9,717 |  |  |  | — |  |  |  | 9,669 |
Installment loans to individuals |  |  | 2 |  |  |  | 3 |  |  |  | — |  |  |  | 2 |
Total non-covered impaired loans with no allowance |  | $ | 22,350 |  |  |  | 28,822 |  |  |  | — |  |  |  | 22,967 |
Total covered impaired loans with no allowance |  | $ | 3,000 |  |  |  | 3,361 |  |  |  | — |  |  |  | 3,991 |
Total impaired loans with no allowance recorded |  | $ | 25,350 |  |  |  | 32,183 |  |  |  | — |  |  |  | 26,958 |
Non-covered loans with an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 93 |  |  |  | 111 |  |  |  | 14 |  |  |  | 286 |
Real estate – mortgage – construction, land development & other land loans |  |  | 850 |  |  |  | 873 |  |  |  | 172 |  |  |  | 886 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 11,271 |  |  |  | 11,447 |  |  |  | 1,263 |  |  |  | 12,196 |
Real estate – mortgage –home equity loans / lines of credit |  |  | 238 |  |  |  | 238 |  |  |  | 11 |  |  |  | 420 |
Real estate – mortgage –commercial and other |  |  | 4,857 |  |  |  | 5,036 |  |  |  | 478 |  |  |  | 5,490 |
Installment loans to individuals |  |  | 70 |  |  |  | 80 |  |  |  | 70 |  |  |  | 82 |
Total non-covered impaired loans with allowance |  | $ | 17,379 |  |  |  | 17,785 |  |  |  | 2,008 |  |  |  | 19,360 |
Total covered impaired loans with allowance |  | $ | 2,506 |  |  |  | 2,665 |  |  |  | 443 |  |  |  | 2,750 |
Total impaired loans with an allowance recorded |  | $ | 19,885 |  |  |  | 20,450 |  |  |  | 2,451 |  |  |  | 22,110 |
Interest income recorded on non-covered and covered impaired loans during the six months ended June 30, 2016 was insignificant. The following table presents loans individually evaluated for impairment by class of loans as of December 31, 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 |  | $ | 360 |  |  |  | 422 |  |  |  | — |  |  |  | 194 |
Real estate – mortgage – construction, land development & other land loans |  |  | 3,944 |  |  |  | 7,421 |  |  |  | — |  |  |  | 4,636 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 8,713 |  |  |  | 9,803 |  |  |  | — |  |  |  | 7,309 |
Real estate – mortgage –home equity loans / lines of credit |  |  | 114 |  |  |  | 161 |  |  |  | — |  |  |  | 425 |
Real estate – mortgage –commercial and other |  |  | 11,565 |  |  |  | 13,144 |  |  |  | — |  |  |  | 16,590 |
Installment loans to individuals |  |  | 3 |  |  |  | 4 |  |  |  | — |  |  |  | 5 |
Total non-covered impaired loans with no allowance |  | $ | 24,699 |  |  |  | 30,955 |  |  |  | — |  |  |  | 29,159 |
Total covered impaired loans with no allowance |  | $ | 5,231 |  |  |  | 8,529 |  |  |  | — |  |  |  | 5,607 |
Total impaired loans with no allowance recorded |  | $ | 29,930 |  |  |  | 39,484 |  |  |  | — |  |  |  | 34,766 |
Non-covered loans with an allowance recorded: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 632 |  |  |  | 662 |  |  |  | 304 |  |  |  | 607 |
Real estate – mortgage – construction, land development & other land loans |  |  | 954 |  |  |  | 976 |  |  |  | 241 |  |  |  | 1,585 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 12,612 |  |  |  | 12,768 |  |  |  | 1,440 |  |  |  | 12,931 |
Real estate – mortgage –home equity loans / lines of credit |  |  | 644 |  |  |  | 645 |  |  |  | 321 |  |  |  | 430 |
Real estate – mortgage –commercial and other |  |  | 5,621 |  |  |  | 5,806 |  |  |  | 336 |  |  |  | 4,353 |
Installment loans to individuals |  |  | 73 |  |  |  | 80 |  |  |  | 45 |  |  |  | 75 |
Total non-covered impaired loans with allowance |  | $ | 20,536 |  |  |  | 20,937 |  |  |  | 2,687 |  |  |  | 19,981 |
Total covered impaired loans with allowance |  | $ | 3,213 |  |  |  | 3,476 |  |  |  | 624 |  |  |  | 3,742 |
Total impaired loans with an allowance recorded |  | $ | 23,749 |  |  |  | 24,413 |  |  |  | 3,311 |  |  |  | 23,723 |
Interest income recorded on non-covered and covered impaired loans during the year ended December 31, 2015 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 regularly 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:
| Risk Grade | Description
Pass: |
| 1 | Loans with virtually no risk, including cash secured loans.
| 2 | Loans with documented significant overall financial strength. These loans have minimum chance of loss due to the presence of multiple sources of repayment – each clearly sufficient to satisfy the obligation.
| 3 | Loans with documented satisfactory overall financial strength. These loans have a low loss potential due to presence of at least two clearly identified sources of repayment – each of which is sufficient to satisfy the obligation under the present circumstances.
| 4 | Loans to borrowers with acceptable financial condition. These loans could have signs of minor operational weaknesses, lack of adequate financial information, or loans supported by collateral with questionable value or marketability.
| 5 | Existing loans that meet the guidelines for a Risk Graded 6 loan, except the collateral coverage is sufficient to satisfy the debt with no risk of loss under reasonable circumstances.
| P (Pass) | Consumer loans (<$500,000) that are of satisfactory credit quality with borrowers who exhibit good personal credit history, average personal financial strength and moderate debt levels. These loans generally conform to Bank policy, but may include approved mitigated exceptions to the guidelines.
Special Mention: |
| 6 | Existing loans with defined weaknesses in primary source of repayment that, if not corrected, could cause a loss to the Bank.
Classified: |
| 7 | An existing loan inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. These loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.
| 8 | Loans that have a well-defined weakness that make the collection or liquidation in full highly questionable and improbable. Loss appears imminent, but the exact amount and timing is uncertain.
| 9 | 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.
| F (Fail) | Consumer loans (<$500,000) with a well-defined weakness, such as exceptions of any kind with no mitigating factors, history of paying outside the terms of the note, insufficient income to support the current level of debt, etc.
In the second quarter of 2016, the Company made nonsubstantive changes to the numerical scale of risk grades. Previously, the description for grade 5 noted above was assigned a grade of 9. As a result of the change, most grade 9 loans were assigned a grade of 5 and the numerical grade assignments for the previous grades of 5 and below were moved one row lower in the descriptions. In the tables below, prior periods have been adjusted to be consistent with the presentation for June 30, 2016. Also during the second quarter of 2016, the Company introduced a pass/fail grade system for smaller balance consumer loans (balances less than $500,000), primarily residential home loans and installment consumer loans. Accordingly, all such consumer loans are no longer graded on a scale of 1-9, but instead are assigned a rating of “pass” or “fail”, with “fail” loans being considered as classified loans. Substantially all of the $25.4 million of non-covered consumer loans and $4.3 million of covered consumer loans that had previously been assigned a grade of “special mention” were assigned a rating of “pass”, which impacts the comparability of the June 30, 2016 table below to prior periods. The changes noted above had no significant impact on the Company’s allowance for loan loss calculation. The June 30, 2016 table below also reflects the impact of the previously discussed reclassification of approximately $17.7 million of loans from the covered category to the non-covered category upon the expiration of the loss-share provisions with the FDIC. Approximately $3.8 million of these loans had “classified” grades. The following table presents the Company’s recorded investment in loans by credit quality indicators as of June 30, 2016.
($ in thousands) |  |  |
|  | Pass |  |  | Special Mention Loans |  |  | Classified Accruing Loans |  |  | Classified Nonaccrual Loans |  |  | Total |
Non-covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 235,000 |  |  |  | 2,855 |  |  |  | 4,137 |  |  |  | 2,870 |  |  |  | 244,862 |
Real estate – construction, land development & other land loans |  |  | 288,017 |  |  |  | 9,781 |  |  |  | 8,880 |  |  |  | 4,154 |  |  |  | 310,832 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 620,516 |  |  |  | 17,020 |  |  |  | 28,516 |  |  |  | 17,315 |  |  |  | 683,367 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 220,230 |  |  |  | 1,373 |  |  |  | 4,897 |  |  |  | 2,406 |  |  |  | 228,906 |
Real estate – mortgage – commercial and other |  |  | 948,844 |  |  |  | 29,744 |  |  |  | 14,910 |  |  |  | 6,821 |  |  |  | 1,000,319 |
Installment loans to individuals |  |  | 49,583 |  |  |  | 352 |  |  |  | 237 |  |  |  | 215 |  |  |  | 50,387 |
Total |  | $ | 2,362,190 |  |  |  | 61,125 |  |  |  | 61,577 |  |  |  | 33,781 |  |  |  | 2,518,673 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,074 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,519,747 |
Total covered loans |  | $ | 58,153 |  |  |  | 1,745 |  |  |  | 14,295 |  |  |  | 4,194 |  |  | $ | 78,387 |
Total loans |  | $ | 2,420,343 |  |  |  | 62,870 |  |  |  | 75,872 |  |  |  | 37,975 |  |  | $ | 2,598,134 |
The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2015.
($ in thousands) |  |  |
|  | Pass |  |  | Special Mention Loans |  |  | Classified Accruing Loans |  |  | Classified Nonaccrual Loans |  |  | Total |
Non-covered loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  | $ | 191,905 |  |  |  | 3,453 |  |  |  | 3,476 |  |  |  | 2,964 |  |  |  | 201,798 |
Real estate – construction, land development & other land loans |  |  | 277,300 |  |  |  | 13,296 |  |  |  | 9,980 |  |  |  | 4,652 |  |  |  | 305,228 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | 609,880 |  |  |  | 34,407 |  |  |  | 29,793 |  |  |  | 18,822 |  |  |  | 692,902 |
Real estate – mortgage – home equity loans / lines of credit |  |  | 207,335 |  |  |  | 7,045 |  |  |  | 4,473 |  |  |  | 3,142 |  |  |  | 221,995 |
Real estate – mortgage – commercial and other |  |  | 889,871 |  |  |  | 32,022 |  |  |  | 13,733 |  |  |  | 10,197 |  |  |  | 945,823 |
Installment loans to individuals |  |  | 46,209 |  |  |  | 776 |  |  |  | 464 |  |  |  | 217 |  |  |  | 47,666 |
Total |  | $ | 2,222,500 |  |  |  | 90,999 |  |  |  | 61,919 |  |  |  | 39,994 |  |  |  | 2,415,412 |
Unamortized net deferred loan costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 873 |
Total non-covered loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,416,285 |
Total covered loans |  | $ | 71,398 |  |  |  | 7,423 |  |  |  | 16,004 |  |  |  | 7,816 |  |  | $ | 102,641 |
Total loans |  | $ | 2,293,898 |  |  |  | 98,422 |  |  |  | 77,923 |  |  |  | 47,810 |  |  | $ | 2,518,926 |
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 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, 2016 and 2015.
($ in thousands) |  | For the three months ended June 30, 2016 |  |  | For the three months ended June 30, 2015 |
|  | 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 |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 1 |  |  |  | 8 |  |  |  | 8 |
Real estate – construction, land development & other land loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 152 |  |  |  | 152 |
Real estate – mortgage – home equity loans / lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – commercial and other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-covered TDRs – Nonaccrual |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – construction, land development & other land loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – home equity loans / lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – commercial and other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total non-covered TDRs arising during period |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | 160 |  |  |  | 160 |
Total covered TDRs arising during period– Accruing |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | — |  |  | $ | — |  |  | $ | — |
Total covered TDRs arising during period – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total TDRs arising during period |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 2 |  |  | $ | 160 |  |  | $ | 160 |
The following table presents information related to loans modified in a troubled debt restructuring during the six months ended June 30, 2016 and 2015.
($ in thousands) |  | For the six months ended June 30, 2016 |  |  | For the six months ended June 30, 2015 |
|  | 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 |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 8 |  |  | $ | 8 |
Real estate – construction, land development & other land loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | 265 |  |  |  | 265 |
Real estate – mortgage – home equity loans / lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – commercial and other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 51 |  |  |  | 51 |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Non-covered TDRs – Nonaccrual |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – construction, land development & other land loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 1 |  |  |  | 1 |
Real estate – mortgage – residential (1-4 family) first mortgages |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | 304 |  |  |  | 304 |
Real estate – mortgage – home equity loans / lines of credit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage – commercial and other |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Installment loans to individuals |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total non-covered TDRs arising during period |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8 |  |  |  | 629 |  |  |  | 629 |
Total covered TDRs arising during period– Accruing |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 2 |  |  | $ | 139 |  |  | $ | 139 |
Total covered TDRs arising during period – Nonaccrual |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total TDRs arising during period |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 10 |  |  | $ | 768 |  |  | $ | 768 |
Accruing restructured loans that were modified in the previous 12 months and that defaulted during the three months ended June 30, 2016 and 2015 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 June 30, 2016 |  |  | For the three months ended June 30, 2015 |
|  | Number of Contracts |  |  | Recorded Investment |  |  | Number of Contracts |  |  | Recorded Investment |
Non-covered accruing TDRs that subsequently defaulted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  |  | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 7 |
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, 2016 and 2015 are presented in the table below.
($ in thousands) |  | For the six months ended June 30, 2016 |  |  | For the six months ended June 30, 2015 |
|  | Number of Contracts |  |  | Recorded Investment |  |  | Number of Contracts |  |  | Recorded Investment |
Non-covered accruing TDRs that subsequently defaulted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial, financial, and agricultural |  |  | — |  |  | $ | — |  |  |  | 1 |  |  | $ | 7 |
Real estate – mortgage – residential (1–4 family first mortgages) |  |  | — |  |  |  |  |  |  |  | 1 |  |  |  | 34 |
Real estate – mortgage – commercial and other |  |  | 1 |  |  |  | 21 |  |  |  | — |  |  |  | — |
Total non-covered TDRs that subsequently defaulted |  |  | 1 |  |  | $ | 21 |  |  |  | 2 |  |  | $ | 41 |
Total accruing covered TDRs that subsequently defaulted |  |  | 1 |  |  | $ | 44 |  |  |  | — |  |  | $ | — |
Total accruing TDRs that subsequently defaulted |  |  | 2 |  |  | $ | 65 |  |  |  | 2 |  |  | $ | 41 |

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