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Loans and Asset Quality Information

12 Months Ended

Dec. 31, 2018

Loans and Asset Quality Information [Abstract]

Note 4. Loans and Asset Quality Information

Prior to September 22, 2016, the Company’s banking subsidiary, First Bank, had certain loans and foreclosed real estate that were covered by loss share agreements between the FDIC and First Bank which afforded 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 FDIC-assisted purchase transactions. On September 22, 2016, the Company terminated all of the loss share agreements with the FDIC, such that all future losses and recoveries on loans and foreclosed real estate associated with the failed banks acquired through FDIC-assisted transactions began to be borne solely by First Bank.

In the information presented below, the term “covered” is used to describe assets that were subject to FDIC loss share agreements, while the term “non-covered” refers to the Company’s legacy assets, which were not included in any type of loss share arrangement. As discussed previously, all loss share agreements were terminated during 2016 and thus the entire loan portfolio is now classified as non-covered. Certain prior period disclosures will continue to present the breakout of the loan portfolio between covered and non-covered.

On March 3, 2017, the Company acquired Carolina Bank (see Note 2 for more information). As a result of this acquisition, the Company recorded loans with a fair value of $497.5 million. Of those loans, $19.3 million were considered to be purchased credit impaired (“PCI”) loans, which are loans for which it is probable at acquisition date that all contractually required payments will not be collected. The remaining loans were considered to be purchased non-impaired loans and their related fair value discount or premium is being recognized as an adjustment to yield over the remaining life of each loan.

The following table relates to acquired Carolina Bank PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the acquisition date.

($ in thousands)	Carolina Bank Acquisition on March 3, 2017
Contractually required payments	$	27,108
Nonaccretable difference		(4,237	)
Cash flows expected to be collected at acquisition		22,871
Accretable yield		(3,617	)
Fair value of PCI loans at acquisition date	$	19,254

The following table relates to acquired Carolina Bank purchased non-impaired loans and provides the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the acquisition date.

($ in thousands)	Carolina Bank Acquisition on March 3, 2017
Contractually required payments	$	569,980
Fair value of acquired loans at acquisition date		478,515
Contractual cash flows not expected to be collected		3,650

On October 1, 2017, the Company acquired Asheville Savings Bank (see Note 2 for more information). As a result of this acquisition, the Company recorded loans with a fair value of $606.2 million. Of those loans, $9.9 million were considered to be PCI loans. The remaining loans were considered to be purchased non-impaired loans and their related fair value discount or premium is being recognized as an adjustment to yield over the remaining life of each loan.

The following table relates to acquired Asheville Savings Bank PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the acquisition date.

($ in thousands)	Asheville Savings Bank Acquisition on October 1, 2017
Contractually required payments	$	13,424
Nonaccretable difference		(1,734	)
Cash flows expected to be collected at acquisition		11,690
Accretable yield		(1,804	)
Fair value of PCI loans at acquisition date	$	9,886

The following table relates to acquired Asheville Savings Bank purchased non-impaired loans and provides the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the acquisition date.

($ in thousands)	Asheville Savings Bank Acquisition on October 1, 2017
Contractually required payments	$	727,706
Fair value of acquired loans at acquisition date		595,167
Contractual cash flows not expected to be collected		7,000

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

($ in thousands)	December 31, 2018				December 31, 2017
	Amount		Percentage		Amount			Percentage
All loans:

Commercial, financial, and agricultural	$	457,037		11%	$	381,130			10%
Real estate – construction, land development & other land loans		518,976		12%		539,020			13%
Real estate – mortgage – residential (1-4 family) first mortgages		1,054,176		25%		972,772			24%
Real estate – mortgage – home equity loans / lines of credit		359,162		8%		379,978			9%
Real estate – mortgage – commercial and other		1,787,022		42%		1,696,107			42%
Installment loans to individuals		71,392		2%		74,348			2%
Subtotal		4,247,765		100%		4,043,355			100%
Unamortized net deferred loan costs (fees)		1,299				(986	)
Total loans	$	4,249,064			$	4,042,369

Loans in the amount of $3.8 billion and $3.6 billion were pledged as collateral for certain borrowings as of December 31, 2018 and December 31, 2017, respectively (see Note 10).

The loans above also include loans to executive officers and directors serving the Company at December 31, 2018 and to their associates, totaling approximately $5.7 million and $3.6 million at December 31, 2018 and 2017, respectively. During 2018, net advances on such loans were approximately $2.1 million. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other non-related borrowers. Management does not believe these loans involve more than the normal risk of collectability or present other unfavorable features.

At December 31, 2018 and 2017, there was a remaining unaccreted discount on the retained portion of sold SBA loans amounting to $5.7 million and $2.6 million, respectively. As of December 31, 2018 and 2017, there was a remaining accretable discount of $15.0 million and $21.5 million, respectively, related to purchased non-impaired loans. Both types of discounts are amortized as yield adjustments over the respective lives of the loans, so long as the loans perform.

The following table presents changes in the carrying value of PCI loans.

($ in thousands) Purchased Credit Impaired Loans	For the Year Ended December 31, 2018			For the Year Ended December 31, 2017
Balance at beginning of period	$	23,165			514
Additions due to acquisition of Carolina Bank		—			19,254
Additions due to acquisition of Asheville Savings Bank		—			9,886
Change due to payments received and accretion		(5,799	)		(6,016	)
Change due to loan charge-offs		(10	)		(12	)
Transfers to foreclosed real estate		(4	)		(69	)
Other		41			(392	)
Balance at end of period	$	17,393			23,165

The following table presents changes in the accretable yield for PCI loans.

($ in thousands) Accretable Yield for PCI loans	For the Year Ended December 31, 2018			For the Year Ended December 31, 2017
Balance at beginning of period	$	4,688			—
Additions due to acquisition of Carolina Bank		—			3,617
Additions due to acquisition of Asheville Savings Bank		—			1,804
Accretion		(2,050	)		(1,846	)
Reclassification from (to) nonaccretable difference		849			423
Other, net		1,263			690
Balance at end of period	$	4,750			4,688

During 2018, the Company received $772,000 in payments that exceeded the carrying amount of the related PCI loans, of which $493,000 was recognized as loan discount accretion income and $279,000 was recorded as additional loan interest income. During 2017, the Company received $1,064,000 in payments that exceeded the carrying amount of the related PCI loans, of which $962,000 was recognized as loan discount accretion income and $102,000 was recorded as additional loan interest income.

During 2018, the Company recorded $750,000 in interest recoveries on purchased non-impaired loans. Amounts recorded for 2016 and 2017 were not significant.

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

ASSET QUALITY DATA ($ in thousands)	December 31, 2018		December 31, 2017

Nonperforming assets
Nonaccrual loans	$	22,575		20,968
Restructured loans - accruing		13,418		19,834
Accruing loans > 90 days past due		—		—
Total nonperforming loans		35,993		40,802
Foreclosed real estate		7,440		12,571
Total nonperforming assets	$	43,433		53,373

Purchased credit impaired loans not included above (1)	$	17,393		23,165

(1) In the March 3, 2017 acquisition of Carolina Bank. and the October 1, 2017 acquisition of Asheville Savings Bank, the Company acquired $19.3 million and $9.9 million, respectively, in PCI loans in accordance with ASC 310-30 accounting guidance. These loans are excluded from nonperforming loans, including $0.6 million and $0.6 million in PCI loans at December 31, 2018 and 2017, respectively, that are contractually past due 90 days or more.

At December 31, 2018 and 2017, the Company had $0.7 million and $0.8 million in residential mortgage loans in process of foreclosure, respectively.

If the nonaccrual and restructured loans as of December 31, 2018, 2017 and 2016 had been current in accordance with their original terms and had been outstanding throughout the period (or since origination if held for part of the period), gross interest income in the amounts of approximately $1,616,000, $1,503,000, and $1,893,000 for nonaccrual loans and $974,000, $1,182,000, and $1,417,000, for restructured loans would have been recorded for 2018, 2017, and 2016, respectively. Interest income on such loans that was actually collected and included in net income in 2018, 2017 and 2016 amounted to approximately $765,000, $415,000, and $266,000 for nonaccrual loans (prior to their being placed on nonaccrual status), and $763,000, $885,000, and $423,000 for restructured loans, respectively. At December 31, 2018 and 2017, there were no commitments to lend additional funds to debtors whose loans were nonperforming.

The following is a summary the Company’s nonaccrual loans by major categories.

($ in thousands)	December 31, 2018		December 31, 2017
Commercial, financial, and agricultural	$	919		1,001
Real estate – construction, land development & other land loans		2,265		1,822
Real estate – mortgage – residential (1-4 family) first mortgages		10,115		12,201
Real estate – mortgage – home equity loans / lines of credit		1,685		2,524
Real estate – mortgage – commercial and other		7,452		3,345
Installment loans to individuals		139		75
Total	$	22,575		20,968

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2018.

($ in thousands)	Accruing 30-59 Days Past Due		Accruing 60- 89 Days Past Due		Accruing 90 Days or More Past Due		Nonaccrual Loans		Accruing Current		Total Loans Receivable

Commercial, financial, and agricultural	$	191		5		—		919		455,692		456,807
Real estate – construction, land development & other land loans		849		212		—		2,265		515,472		518,798
Real estate – mortgage – residential (1-4 family) first mortgages		14,178		1,369		—		10,115		1,022,261		1,047,923
Real estate – mortgage – home equity loans / lines of credit		1,048		254		—		1,685		355,831		358,818
Real estate – mortgage – commercial and other		709		520		—		7,452		1,768,205		1,776,886
Installment loans to individuals		359		220		—		139		70,422		71,140
Purchased credit impaired		990		138		583		—		15,682		17,393
Total	$	18,324		2,718		583		22,575		4,203,565		4,247,765
Unamortized net deferred loan costs												1,299
Total loans											$	4,249,064

The following table presents an analysis of the payment status of the Company’s loans as of December 31, 2017.

($ in thousands)	Accruing 30-59 Days Past Due		Accruing 60- 89 Days Past Due		Accruing 90 Days or More Past Due		Nonaccrual Loans		Accruing Current		Total Loans Receivable

Commercial, financial, and agricultural	$	89		151		—		1,001		379,241		380,482
Real estate – construction, land development & other land loans		1,154		214		—		1,822		535,423		538,613
Real estate – mortgage – residential (1-4 family) first mortgages		6,777		1,370		—		12,201		943,565		963,913
Real estate – mortgage – home equity loans / lines of credit		1,347		10		—		2,524		375,814		379,695
Real estate – mortgage – commercial and other		1,270		451		—		3,345		1,678,529		1,683,595
Installment loans to individuals		445		95		—		75		73,277		73,892
Purchased credit impaired		821		77		601		—		21,666		23,165
Total	$	11,903		2,368		601		20,968		4,007,515		4,043,355
Unamortized net deferred loan fees												(986	)
Total loans											$	4,042,369

The following table presents the activity in the allowance for loan losses for the year ended December 31, 2018.

($ 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			Install- ment Loans to Individuals			Unallo- cated			Total

As of and for the year ended December 31, 2018

Beginning balance	$	3,111			2,816			6,147			1,827			6,475			950			1,972			23,298
Charge-offs		(2,128	)		(158	)		(1,734	)		(711	)		(1,459	)		(781	)		—			(6,971	)
Recoveries		1,195			4,097			833			364			1,503			309			—			8,301
Provisions		711			(4,512	)		(49	)		185			1,464			474			(1,862	)		(3,589	)
Ending balance	$	2,889			2,243			5,197			1,665			7,983			952			110			21,039

Ending balances as of December 31, 2018: Allowance for loan losses
Individually evaluated for impairment	$	226			134			955			48			906			—			—			2,269
Collectively evaluated for impairment	$	2,661			2,109			4,143			1,608			7,070			941			110			18,642
Purchased credit impaired	$	2			—			99			9			7			11			—			128

Loans receivable as of December 31, 2018:
Ending balance – total	$	457,037			518,976			1,054,176			359,162			1,787,022			71,392			—			4,247,765
Unamortized net deferred loan costs																							1,299
Total loans																						$	4,249,064

Ending balances as of December 31, 2018: Loans
Individually evaluated for impairment	$	696			1,345			12,391			296			9,525			—			—			24,253
Collectively evaluated for impairment	$	456,111			517,453			1,035,532			358,522			1,767,361			71,140			—			4,206,119
Purchased credit impaired	$	230			178			6,253			344			10,136			252			—			17,393

The following table presents the activity in the allowance for loan losses for the year ended December 31, 2017.

($ 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			Install- ment Loans to Individuals			Unallo- cated		Total

As of and for the year ended December 31, 2017

Beginning balance	$	3,829			2,691			7,704			2,420			5,098			1,145			894		23,781
Charge-offs		(1,622	)		(589	)		(2,641	)		(978	)		(1,182	)		(799	)		—		(7,811	)
Recoveries		1,311			2,579			1,076			333			1,027			279			—		6,605
Provisions		(407	)		(1,865	)		8			52			1,532			325			1,078		723
Ending balance	$	3,111			2,816			6,147			1,827			6,475			950			1,972		23,298

Ending balances as of December 31, 2017: Allowance for loan losses
Individually evaluated for impairment	$	215			18			1,099			—			232			—			—		1,564
Collectively evaluated for impairment	$	2,896			2,798			4,831			1,788			6,226			950			1,972		21,461
Purchased credit impaired	$	—			—			217			39			17			—			—		273

Loans receivable as of December 31, 2017:
Ending balance – total	$	381,130			539,020			972,772			379,978			1,696,107			74,348			—		4,043,355
Unamortized net deferred loan fees																						(986	)
Total loans																					$	4,042,369

Ending balances as of December 31, 2017: Loans
Individually evaluated for impairment	$	579			2,975			14,800			368			8,493			—			—		27,215
Collectively evaluated for impairment	$	379,903			535,638			949,113			379,327			1,675,102			73,892			—		3,992,975
Purchased credit impaired	$	648			407			8,859			283			12,512			456			—		23,165

The following table presents the activity in the allowance for loan losses for the year ended December 31, 2016. There were no covered loans at December 31, 2016 and all reserves associated with previously covered loans were transferred to the non-covered allowance.

($ 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			Covered			Total

As of and for the year ended December 31, 2016
Beginning balance	$	4,742			3,754			7,832			2,893			5,816			1,051			696			1,799			28,583
Charge-offs		(2,271	)		(1,101	)		(3,815	)		(969	)		(1,005	)		(1,008	)		(1	)		(244	)		(10,414	)
Recoveries		805			1,422			1,060			250			836			354			—			1,958			6,685
Transfer from covered status		56			65			839			293			127			—			1			(1,381	)		—
Removed due to branch loan sale		(263	)		(39	)		(347	)		(110	)		(228	)		(63	)		—			—			(1,050	)
Provisions		760			(1,410	)		2,135			63			(448	)		811			198			(2,132	)		(23	)
Ending balance	$	3,829			2,691			7,704			2,420			5,098			1,145			894			—			23,781

Ending balances as of December 31, 2016: Allowance for loan losses
Individually evaluated for impairment	$	7			184			1,339			5			105			—			—			—			1,640
Collectively evaluated for impairment	$	3,822			2,507			6,365			2,415			4,993			1,145			894			—			22,141
Purchased credit impaired	$	—			—			—			—			—			—			—			—			—

Loans receivable as of December 31, 2016:
Ending balance – total	$	261,813			354,667			750,679			239,105			1,049,460			55,037			—			—			2,710,761
Unamortized net deferred loan fees																										(49	)
Total loans																									$	2,710,712

Ending balances as of December 31, 2016: Loans
Individually evaluated for impairment	$	644			4,001			20,807			280			6,494			—			—			—			32,226
Collectively evaluated for impairment	$	261,169			350,666			729,872			238,825			1,042,452			55,037			—			—			2,678,021
Purchased credit impaired	$	—			—			—			—			514			—			—			—			514

The following table presents loans individually evaluated for impairment by class of loans, excluding purchased credit impaired loans, as of December 31, 2018.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Impaired loans with no related allowance recorded:

Commercial, financial, and agricultural	$	310		310		—		957
Real estate – mortgage – construction, land development & other land loans		485		803		—		2,366
Real estate – mortgage – residential (1-4 family) first mortgages		4,626		4,948		—		4,804
Real estate – mortgage –home equity loans / lines of credit		22		31		—		91
Real estate – mortgage –commercial and other		3,475		4,237		—		3,670
Installment loans to individuals		—		—		—		—
Total impaired loans with no allowance	$	8,918		10,329		—		11,888

Impaired loans with an allowance recorded:

Commercial, financial, and agricultural	$	386		387		226		422
Real estate – mortgage – construction, land development & other land loans		860		864		134		385
Real estate – mortgage – residential (1-4 family) first mortgages		7,765		7,904		955		8,963
Real estate – mortgage –home equity loans / lines of credit		274		275		48		184
Real estate – mortgage –commercial and other		6,050		6,054		906		5,911
Installment loans to individuals		—		—		—		2
Total impaired loans with allowance	$	15,335		15,484		2,269		15,867

Interest income recorded on impaired loans during the year ended December 31, 2018 was insignificant.

The following table presents loans individually evaluated for impairment by class of loans, excluding purchased credit impaired loans, as of December 31, 2017.

($ in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment
Impaired loans with no related allowance recorded:

Commercial, financial, and agricultural	$	183		425		—		276
Real estate – mortgage – construction, land development & other land loans		2,743		3,941		—		2,846
Real estate – mortgage – residential (1-4 family) first mortgages		5,205		5,728		—		7,067
Real estate – mortgage –home equity loans / lines of credit		368		387		—		129
Real estate – mortgage –commercial and other		3,066		3,321		—		3,143
Installment loans to individuals		—		—		—		—
Total impaired loans with no allowance	$	11,565		13,802		—		13,461

Impaired loans with an allowance recorded:

Commercial, financial, and agricultural	$	396		396		215		214
Real estate – mortgage – construction, land development & other land loans		232		241		18		503
Real estate – mortgage – residential (1-4 family) first mortgages		9,595		9,829		1,099		10,077
Real estate – mortgage –home equity loans / lines of credit		—		—		—		66
Real estate – mortgage –commercial and other		5,427		5,427		232		5,369
Installment loans to individuals		—		—		—		—
Total impaired loans with allowance	$	15,650		15,893		1,564		16,229

Interest income recorded on impaired loans during the year ended December 31, 2017 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	Loans that represent above average risk due to minor weaknesses and warrant closer scrutiny by management. Collateral is generally available and felt to provide reasonable coverage with realizable liquidation values in normal circumstances. Repayment performance is satisfactory.
	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.

The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2018.

($ in thousands)
	Pass		Special Mention Loans		Classified Accruing Loans		Classified Nonaccrual Loans		Total

Commercial, financial, and agricultural	$	452,373		3,056		459		919		456,807
Real estate – construction, land development & other land loans		509,251		5,668		1,614		2,265		518,798
Real estate – mortgage – residential (1-4 family) first mortgages		1,004,457		12,238		21,113		10,115		1,047,923
Real estate – mortgage – home equity loans / lines of credit		348,792		1,688		6,653		1,685		358,818
Real estate – mortgage – commercial and other		1,750,810		14,484		4,140		7,452		1,776,886
Installment loans to individuals		70,357		231		413		139		71,140
Purchased credit impaired		8,355		5,214		3,824		—		17,393
Total	$	4,144,395		42,579		38,216		22,575		4,247,765
Unamortized net deferred loan costs										1,299
Total loans										4,249,064

The following table presents the Company’s recorded investment in loans by credit quality indicators as of December 31, 2017.

($ in thousands)
	Pass		Special Mention Loans		Classified Accruing Loans		Classified Nonaccrual Loans		Total

Commercial, financial, and agricultural	$	368,658		9,901		922		1,001		380,482
Real estate – construction, land development & other land loans		523,642		7,129		6,020		1,822		538,613
Real estate – mortgage – residential (1-4 family) first mortgages		905,111		16,235		30,366		12,201		963,913
Real estate – mortgage – home equity loans / lines of credit		365,982		3,784		7,405		2,524		379,695
Real estate – mortgage – commercial and other		1,647,725		23,335		9,190		3,345		1,683,595
Installment loans to individuals		73,379		222		216		75		73,892
Purchased credit impaired		6,541		12,309		4,315		—		23,165
Total	$	3,891,038		72,915		58,434		20,968		4,043,355
Unamortized net deferred loan fees										(986	)
Total loans										4,042,369

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 majority of the Company’s troubled debt restructurings modified during the years ended December 31, 2018 and 2017 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 years ended December 31, 2018 and 2017.

($ in thousands)	For the year ended December 31, 2018						For the year ended December 31, 2017
	Number of Contracts		Pre- Modification Restructured Balances		Post- Modification Restructured Balances		Number of Contracts		Pre- Modification Restructured Balances		Post- Modification Restructured Balances
TDRs – Accruing
Commercial, financial, and agricultural		—	$	—	$	—		—	$	—	$	—
Real estate – construction, land development & other land loans		—		—		—		—		—		—
Real estate – mortgage – residential (1-4 family) first mortgages		2		254		273		—		—		—
Real estate – mortgage – home equity loans / lines of credit		—		—		—		—		—		—
Real estate – mortgage – commercial and other		—		—		—		6		4,120		4,095
Installment loans to individuals		—		—		—		—		—		—

TDRs – Nonaccrual
Commercial, financial, and agricultural		—		—		—		1		38		25
Real estate – construction, land development & other land loans		1		61		61		1		32		32
Real estate – mortgage – residential (1-4 family) first mortgages		3		340		350		2		262		262
Real estate – mortgage – home equity loans / lines of credit		—		—		—		—		—		—
Real estate – mortgage – commercial and other		—		—		—		—		—		—
Installment loans to individuals		—		—		—		—		—		—

Total TDRs arising during period		6	$	655	$	684		10	$	4,452	$	4,414

Accruing restructured loans that were modified in the previous 12 months and that defaulted during the years ended December 31, 2018 and 2017 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 year ended December 31, 2018				For the year ended December 31, 2017
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment

Accruing TDRs that subsequently defaulted
Real estate – mortgage – residential (1-4 family first mortgages)		1	$	60		2		880
Real estate – mortgage – commercial and other		3		1,333		—		—

Total accruing TDRs that subsequently defaulted		4	$	1,393		2	$	880