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LOANS, NET

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

LOANS, NET

NOTE 3 – LOANS, NET

Loan Portfolio Composition. The composition of the loan portfolio was as follows:

(Dollars in Thousands)		September 30, 2015				December 31, 2014
Commercial, Financial and Agricultural		$	169,588			$	136,925
Real Estate – Construction			49,475				41,596
Real Estate – Commercial Mortgage			491,734				510,120
Real Estate – Residential⁽¹⁾			290,784				295,969
Real Estate – Home Equity			232,254				229,572
Consumer⁽²⁾			241,348				217,192
Loans, Net of Unearned Income		$	1,475,183			$	1,431,374

⁽¹⁾

Includes loans in process with outstanding balances of $10.4 million and $7.4 million as of September 30, 2015 and December 31, 2014, respectively.

⁽²⁾

Includes overdraft balances of $2.5 million and $2.4 million as of September 30, 2015 and December 31, 2014, respectively.

Net deferred fees included in loans were $0.9 million and $1.5 million as of September 30, 2015 and December 31, 2014, respectively.

The Company has pledged a blanket floating lien on all 1-4 family residential mortgage loans, commercial real estate mortgage loans, and home equity loans to support available borrowing capacity at the FHLB of Atlanta and has pledged a blanket floating lien on all consumer loans, commercial loans, and construction loans to support available borrowing capacity at the Federal Reserve Bank of Atlanta.

Nonaccrual Loans. Loans are generally placed on nonaccrual status if principal or interest payments become 90 days past due and/or management deems the collectability of the principal and/or interest to be doubtful. Loans are returned to accrual status when the principal and interest amounts contractually due are brought current or when future payments are reasonably assured.

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days and still on accrual by class of loans.

		September 30, 2015								December 31, 2014
(Dollars in Thousands)		Nonaccrual				90 + Days				Nonaccrual				90 + Days
Commercial, Financial and Agricultural		$	60			$	—			$	507			$	—
Real Estate – Construction			491				—				424				—
Real Estate – Commercial Mortgage			5,844				—				5,806				—
Real Estate – Residential			4,973				—				6,737				—
Real Estate – Home Equity			1,679				—				2,544				—
Consumer			91				—				751				—
Total		$	13,138			$	—			$	16,769			$	—

Loan Portfolio Aging. A loan is defined as a past due loan when one full payment is past due or a contractual maturity is over 30 days past due (“DPD”).

The following table presents the aging of the recorded investment in past due loans by class of loans.

(Dollars in Thousands)		30-59 DPD				60-89 DPD				90 + DPD				Total Past Due				Total Current				Total Loans
September 30, 2015
Commercial, Financial and Agricultural		$	281			$	3			$	—			$	284			$	169,244			$	169,588
Real Estate – Construction			—				545				—				545				48,439				49,475
Real Estate – Commercial Mortgage			123				113				—				236				485,654				491,734
Real Estate – Residential			682				1,022				—				1,704				284,107				290,784
Real Estate – Home Equity			397				56				—				453				230,122				232,254
Consumer			883				230				—				1,113				240,144				241,348
Total		$	2,366			$	1,969			$	—			$	4,335			$	1,457,710			$	1,475,183

December 31, 2014
Commercial, Financial and Agricultural		$	352			$	155			$	—			$	507			$	135,911			$	136,925
Real Estate – Construction			690				—				—				690				40,482				41,596
Real Estate – Commercial Mortgage			1,701				569				—				2,270				502,044				510,120
Real Estate – Residential			682				1,147				—				1,829				287,403				295,969
Real Estate – Home Equity			689				85				—				774				226,254				229,572
Consumer			625				97				—				722				215,719				217,192
Total		$	4,739			$	2,053			$	—			$	6,792			$	1,407,813			$	1,431,374

Allowance for Loan Losses. The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses within the existing portfolio of loans. Loans are charged-off to the allowance when losses are deemed to be probable and reasonably quantifiable.

The following table details the activity in the allowance for loan losses by portfolio class. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(Dollars in Thousands)		Commercial, Financial, Agricultural				Real Estate Construction				Real Estate Commercial Mortgage				Real Estate Residential				Real Estate Home Equity				Consumer				Total
Three Months Ended September 30, 2015
Beginning Balance		$	917			$	360			$	4,275			$	5,654			$	2,536			$	1,494			$	15,236
Provision for Loan Losses			183				(64	)			333				(545	)			273				233				413
Charge-Offs			(365	)			—				26				(476	)			(370	)			(318	)			(1,503	)
Recoveries			45				—				86				193				42				225				591
Net Charge-Offs			(320	)			—				112				(283	)			(328	)			(93	)			(912	)
Ending Balance		$	780			$	296			$	4,720			$	4,826			$	2,481			$	1,634			$	14,737
Nine Months Ended September 30, 2015
Beginning Balance		$	784			$	843			$	5,287			$	6,520			$	2,882			$	1,223			$	17,539
Provision for Loan Losses			708				(547	)			426				(870	)			506				858				1,081
Charge-Offs			(894	)			—				(1,163	)			(1,265	)			(1,006	)			(1,245	)			(5,573	)
Recoveries			182				—				170				441				99				798				1,690
Net Charge-Offs			(712	)			—				(993	)			(824	)			(907	)			(447	)			(3,883	)
Ending Balance		$	780			$	296			$	4,720			$	4,826			$	2,481			$	1,634			$	14,737
Three Months Ended September 30, 2014
Beginning Balance		$	706			$	1,267			$	6,147			$	8,214			$	3,066			$	1,143			$	20,543
Provision for Loan Losses			387				(280	)			386				(505	)			331				105				424
Charge-Offs			(86	)			—				(1,208	)			(212	)			(621	)			(386	)			(2,513	)
Recoveries			28				2				213				93				37				266				639
Net Charge-Offs			(58	)			2				(995	)			(119	)			(584	)			(120	)			(1,874	)
Ending Balance		$	1,035			$	989			$	5,538			$	7,590			$	2,813			$	1,128			$	19,093
Nine Months Ended September 30, 2014
Beginning Balance		$	699			$	1,580			$	7,710			$	9,073			$	3,051			$	982			$	23,095
Provision for Loan Losses			371				(598	)			267				(385	)			1,048				579				1,282
Charge-Offs			(183	)			—				(2,831	)			(1,638	)			(1,399	)			(1,212	)			(7,263	)
Recoveries			148				7				392				540				113				779				1,979
Net Charge-Offs			(35	)			7				(2,439	)			(1,098	)			(1,286	)			(433	)			(5,284	)
Ending Balance		$	1,035			$	989			$	5,538			$	7,590			$	2,813			$	1,128			$	19,093

The following table details the amount of the allowance for loan losses by portfolio class disaggregated on the basis of the Company’s impairment methodology.

(Dollars in Thousands)		Commercial, Financial, Agricultural				Real Estate Construction				Real Estate Commercial Mortgage				Real Estate Residential				Real Estate Home Equity				Consumer				Total
September 30, 2015
Period-end amount Allocated to:
Loans Individually Evaluated for Impairment		$	81			$	—			$	2,001			$	2,004			$	365			$	4			$	4,455
Loans Collectively Evaluated for Impairment			699				296				2,719				2,822				2,116				1,630				10,282
Ending Balance		$	780			$	296			$	4,720			$	4,826			$	2,481			$	1,634			$	14,737
December 31, 2014
Period-end amount Allocated to:
Loans Individually Evaluated for Impairment		$	293			$	—			$	2,733			$	2,113			$	638			$	5			$	5,782
Loans Collectively Evaluated for Impairment			491				843				2,554				4,407				2,244				1,218				11,757
Ending Balance		$	784			$	843			$	5,287			$	6,520			$	2,882			$	1,223			$	17,539
September 30, 2014
Period-end amount Allocated to:
Loans Individually Evaluated for Impairment		$	576			$	94			$	3,359			$	2,526			$	471			$	12			$	7,038
Loans Collectively Evaluated for Impairment			459				895				2,179				5,064				2,342				1,116				12,055
Ending Balance		$	1,035			$	989			$	5,538			$	7,590			$	2,813			$	1,128			$	19,093

The Company’s recorded investment in loans related to each balance in the allowance for loan losses by portfolio class and disaggregated on the basis of the Company’s impairment methodology was as follows:

(Dollars in Thousands)		Commercial, Financial, Agricultural				Real Estate Construction				Real Estate Commercial Mortgage				Real Estate Residential				Real Estate Home Equity				Consumer				Total
September 30, 2015
Individually Evaluated for Impairment		$	813			$	468			$	24,170			$	18,079			$	2,702			$	161			$	46,393
Collectively Evaluated for Impairment			168,775				49,007				467,564				272,705				229,552				241,187				1,428,790
Total		$	169,588			$	49,475			$	491,734			$	290,784			$	232,254			$	241,348			$	1,475,183
December 31, 2014
Individually Evaluated for Impairment		$	1,040			$	401			$	32,242			$	20,120			$	3,074			$	216			$	57,093
Collectively Evaluated for Impairment			135,885				41,195				477,878				275,849				226,498				216,976				1,374,281
Total		$	136,925			$	41,596			$	510,120			$	295,969			$	229,572			$	217,192			$	1,431,374
September 30, 2014
Individually Evaluated for Impairment		$	1,489			$	835			$	37,524			$	22,087			$	2,796			$	271			$	65,002
Collectively Evaluated for Impairment			132,267				37,286				464,339				286,208				226,172				203,101				1,349,373
Total		$	133,756			$	38,121			$	501,863			$	308,295			$	228,968			$	203,372			$	1,414,375

Impaired Loans. Loans are deemed to be impaired when, based on current information and events, it is probable that the Company will not be able to collect all amounts due (principal and interest payments), according to the contractual terms of the loan agreement. Loans, for which the terms have been modified, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired.

The following table presents loans individually evaluated for impairment by class of loans.

(Dollars in Thousands)		Unpaid Principal Balance				Recorded Investment With No Allowance				Recorded Investment With Allowance				Related Allowance
September 30, 2015
Commercial, Financial and Agricultural		$	813			$	286			$	527			$	81
Real Estate – Construction			468				311				157				—
Real Estate – Commercial Mortgage			24,170				5,727				18,443				2,001
Real Estate – Residential			18,079				2,933				15,146				2,004
Real Estate – Home Equity			2,702				733				1,969				365
Consumer			161				61				100				4
Total		$	46,393			$	10,051			$	36,342			$	4,455

December 31, 2014
Commercial, Financial and Agricultural		$	1,040			$	189			$	851			$	293
Real Estate – Construction			401				401				—				—
Real Estate – Commercial Mortgage			32,242				11,984				20,258				2,733
Real Estate – Residential			20,120				5,492				14,628				2,113
Real Estate – Home Equity			3,074				758				2,316				638
Consumer			216				3				213				5
Total		$	57,093			$	18,827			$	38,266			$	5,782

The following table summarizes the average recorded investment and interest income recognized by class of impaired loans.

		Three Months Ended September 30,																Nine Months Ended September 30,
		2015								2014								2015								2014
(Dollars in Thousands)		Average Recorded Investment				Total Interest Income				Average Recorded Investment				Total Interest Income				Average Recorded Investment				Total Interest Income				Average Recorded Investment				Total Interest Income
Commercial, Financial and Agricultural		$	942			$	12			$	1,433			$	15			$	1,044			$	34			$	1,482			$	50
Real Estate - Construction			389				—				828				1				395				—				738				4
Real Estate - Commercial Mortgage			26,959				250				39,020				381				29,343				821				42,671				1,298
Real Estate - Residential			18,499				215				22,180				284				19,239				626				21,610				800
Real Estate - Home Equity			2,831				20				2,680				18				2,965				64				2,906				52
Consumer			166				2				293				2				186				6				314				7
Total		$	49,786			$	499			$	66,434			$	701			$	53,172			$	1,551			$	69,721			$	2,211

Credit Risk Management. The Company has adopted comprehensive lending policies, underwriting standards and loan review procedures designed to maximize loan income within an acceptable level of risk. Management and the Board of Directors review and approve these policies and procedures on a regular basis (at least annually).

Reporting systems have been implemented to monitor loan originations, loan quality, concentrations of credit, loan delinquencies and nonperforming loans and potential problem loans. Management and the Credit Risk Oversight Committee periodically review our lines of business to monitor asset quality trends and the appropriateness of credit policies. In addition, total borrower exposure limits are established and concentration risk is monitored. As part of this process, the overall composition of the loan portfolio is reviewed to gauge diversification of risk, client concentrations, industry group, loan type, geographic area, or other relevant classifications of loans. Specific segments of the loan portfolio are monitored and reported to the Board on a quarterly basis and have strategic plans in place to supplement Board approved credit policies governing exposure limits and underwriting standards. Detailed below are the types of loans within the Company’s loan portfolio and risk characteristics unique to each.

Commercial, Financial, and Agricultural – Loans in this category are primarily made based on identified cash flows of the borrower with consideration given to underlying collateral and personal or other guarantees. Lending policy establishes debt service coverage ratio limits that require a borrower’s cash flow to be sufficient to cover principal and interest payments on all new and existing debt. The majority of these loans are secured by the assets being financed or other business assets such as accounts receivable, inventory, or equipment. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy guidelines.

Real Estate Construction – Loans in this category consist of short-term construction loans, revolving and non-revolving credit lines and construction/permanent loans made to individuals and investors to finance the acquisition, development, construction or rehabilitation of real property. These loans are primarily made based on identified cash flows of the borrower or project and generally secured by the property being financed, including 1-4 family residential properties and commercial properties that are either owner-occupied or investment in nature. These properties may include either vacant or improved property. Construction loans are generally based upon estimates of costs and value associated with the completed project. Collateral values are determined based upon third party appraisals and evaluations. Loan to value ratios at origination are governed by established policy guidelines. The disbursement of funds for construction loans is made in relation to the progress of the project and as such these loans are closely monitored by on-site inspections.

Real Estate Commercial Mortgage – Loans in this category consists of commercial mortgage loans secured by property that is either owner-occupied or investment in nature. These loans are primarily made based on identified cash flows of the borrower or project with consideration given to underlying real estate collateral and personal guarantees. Lending policy establishes debt service coverage ratios and loan to value ratios specific to the property type. Collateral values are determined based upon third party appraisals and evaluations.

Real Estate Residential – Residential mortgage loans held in the Company’s loan portfolio are made to borrowers that demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current income, employment status, current assets, and other financial resources, credit history, and the value of the collateral. Collateral consists of mortgage liens on 1-4 family residential properties. Collateral values are determined based upon third party appraisals and evaluations. The Company does not originate sub-prime loans.

Real Estate Home Equity – Home equity loans and lines are made to qualified individuals and are generally secured by senior or junior mortgage liens on owner-occupied 1-4 family homes or vacation homes. Borrower qualifications include favorable credit history combined with supportive income and debt ratio requirements and combined loan to value ratios within established policy guidelines. Collateral values are determined based upon third party appraisals and evaluations.

Consumer Loans – This loan portfolio includes personal installment loans, direct and indirect automobile financing, and overdraft lines of credit. The majority of the consumer loan portfolio consists of indirect and direct automobile loans. Lending policy establishes maximum debt to income ratios, minimum credit scores, and includes guidelines for verification of applicants’ income and receipt of credit reports.

Credit Quality Indicators. As part of the ongoing monitoring of the Company’s loan portfolio quality, management categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment performance, credit documentation, and current economic/market trends, among other factors. Risk ratings are assigned to each loan and revised as needed through established monitoring procedures for individual loan relationships over a predetermined amount and review of smaller balance homogenous loan pools. The Company uses the definitions noted below for categorizing and managing its criticized loans. Loans categorized as “Pass” do not meet the criteria set forth for the Special Mention, Substandard, or Doubtful categories and are not considered criticized.

Special Mention – Loans in this category are presently protected from loss, but weaknesses are apparent which, if not corrected, could cause future problems. Loans in this category may not meet required underwriting criteria and have no mitigating factors. More than the ordinary amount of attention is warranted for these loans.

Substandard – Loans in this category exhibit well-defined weaknesses that would typically bring normal repayment into jeopardy. These loans are no longer adequately protected due to well-defined weaknesses that affect the repayment capacity of the borrower. The possibility of loss is much more evident and above average supervision is required for these loans.

Doubtful – Loans in this category have all the weaknesses inherent in a loan categorized as Substandard, with the characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following table presents the risk category of loans by segment.

(Dollars in Thousands)		Commercial, Financial, Agriculture				Real Estate				Consumer				Total Criticized Loans
September 30, 2015
Special Mention		$	8,121			$	36,078			$	159			$	44,358
Substandard			1,200				59,659				552				61,411
Doubtful			—				—				—				—
Total Criticized Loans		$	9,321			$	95,737			$	711			$	105,769

December 31, 2014
Special Mention		$	8,059			$	51,060			$	114			$	59,233
Substandard			2,817				79,167				1,153				83,137
Doubtful			—				—				—				—
Total Criticized Loans		$	10,876			$	130,227			$	1,267			$	142,370

Troubled Debt Restructurings (“TDRs”). TDRs are loans in which the borrower is experiencing financial difficulty and the Company has granted an economic concession to the borrower that it would not otherwise consider. In these instances, as part of a work-out alternative, the Company will make concessions including the extension of the loan term, a principal moratorium, a reduction in the interest rate, or a combination thereof. The impact of the TDR modifications and defaults are factored into the allowance for loan losses on a loan-by-loan basis as all TDRs are, by definition, impaired loans. Thus, specific reserves are established based upon the results of either a discounted cash flow analysis or the underlying collateral value, if the loan is deemed to be collateral dependent. In the limited circumstances that a loan is removed from TDR classification it is the Company's policy to also remove it from the impaired loan category, but to continue to individually evaluate loan impairment based on the contractual terms specified by the loan agreement.

The following table presents loans classified as TDRs.

		September 30, 2015								December 31, 2014
(Dollars in Thousands)		Accruing				Nonaccruing				Accruing				Nonaccruing
Commercial, Financial and Agricultural		$	876			$	—			$	838			$	266
Real Estate – Construction			—				—				—				—
Real Estate – Commercial Mortgage			18,526				737				26,565				1,591
Real Estate – Residential			14,400				1,682				14,940				2,532
Real Estate – Home Equity			2,000				8				1,856				356
Consumer			159				—				211				—
Total TDRs		$	35,961			$	2,427			$	44,410			$	4,745

Loans classified as TDRs during the periods indicated are presented in the table below. The modifications made during the reporting period involved either an extension of the loan term, an interest rate adjustment, or a principal moratorium, and the financial impact of these modifications was not material.

		Three Months Ended September 30,												Nine Months Ended September 30,
		2015												2015
(Dollars in Thousands)		Number of Contracts				Pre-Modified Recorded Investment				Post-Modified Recorded Investment				Number of Contracts				Pre-Modified Recorded Investment				Post-Modified Recorded Investment
Commercial, Financial and Agricultural			—			$	—			$	—				—			$	—			$	—
Real Estate - Construction			—				—				—				—				—				—
Real Estate - Commercial Mortgage			—				—				—				2				515				515
Real Estate - Residential			1				49				49				6				717				690
Real Estate - Home Equity			1				50				50				1				50				49
Consumer			—				—				—				—				—				—
Total TDRs			2			$	99			$	99				9			$	1,282			$	1,254

		Three Months Ended September 30,												Nine Months Ended September 30,
		2014												2014
(Dollars in Thousands)		Number of Contracts				Pre-Modified Recorded Investment				Post-Modified Recorded Investment				Number of Contracts				Pre-Modified Recorded Investment				Post-Modified Recorded Investment
Commercial, Financial and Agricultural			—			$	—			$	—				1			$	51			$	54
Real Estate – Construction			—				—				—				—				—				—
Real Estate - Commercial Mortgage			1				303				1,125				3				947				1,769
Real Estate – Residential			2				201				182				8				1,308				1,390
Real Estate - Home Equity			5				453				438				8				701				686
Consumer			—				—				—				1				34				33
Total TDRs			8			$	957			$	1,745				21			$	3,041			$	3,932

For the three and nine months ended September 30, 2015, there were no defaults for TDR loans that had been modified within the previous 12 months. For the three and nine months ended September 30, 2014, loans modified as TDRs within the previous 12 months that have subsequently defaulted during the periods indicated are presented in the table below.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2014								2014
(Dollars in Thousands)		Number of Contracts				Post-Modified Recorded Investment⁽¹⁾				Number of Contracts				Post-Modified Recorded Investment⁽¹⁾
Commercial, Financial and Agricultural			—			$	—				—			$	—
Real Estate – Construction			—				—				—				—
Real Estate - Commercial Mortgage			—				—				—				—
Real Estate – Residential			3				334				4				451
Real Estate - Home Equity			—				—				1				153
Consumer			—				—				—				—
Total TDRs			3			$	334				5			$	604

⁽¹⁾

Recorded investment reflects charge-offs and additional funds advanced at time of restructure, if applicable.

The following table provides information on how TDRs were modified during the periods indicated.

		Three Months Ended September 30,								Nine Months Ended September 30,
		2015								2015
(Dollars in Thousands)		Number of Contracts				Recorded Investment⁽¹⁾				Number of Contracts				Recorded Investment⁽¹⁾
Extended amortization			1			$	49				2			$	167
Interest rate adjustment			—				—				1				156
Extended amortization and interest rate adjustment			1				50				6				931
Total TDRs			2			$	99				9			$	1,254

		Three Months Ended September 30,								Nine Months Ended September 30,
		2014								2014
(Dollars in Thousands)		Number of Contracts				Recorded Investment⁽¹⁾				Number of Contracts				Recorded Investment⁽¹⁾
Extended amortization			2			$	158				8			$	1,736
Interest rate adjustment			—				—				1				156
Extended amortization and interest rate adjustment			2				231				5				488
Other			4				1,356				7				1,552
Total TDRs			8			$	1,745				21			$	3,932

⁽¹⁾ Recorded investment reflects charge-offs and additional funds advanced at time of restructure, if applicable.