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Note 7: Loans and Allowance For Loan Losses | 3 Months Ended
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Sep. 30, 2014
Notes |
Note 7: Loans and Allowance For Loan Losses | NOTE 7: LOANS AND ALLOWANCE FOR LOAN LOSSES
| September 30, |  | December 31,
| 2014 |  | 2013
(In Thousands) |  |  |
One- to four-family residential construction | $43,386 |  | $34,662
Subdivision construction | 35,344 |  | 40,409
Land development | 48,581 |  | 57,841
Commercial construction | 361,971 |  | 184,019
Owner occupied one- to four-family residential | 78,984 |  | 89,133
Non-owner occupied one- to four-family residential | 143,414 |  | 145,908
Commercial real estate | 872,294 |  | 780,690
Other residential | 353,225 |  | 325,599
Commercial business | 349,387 |  | 315,269
Industrial revenue bonds | 42,941 |  | 42,230
Consumer auto | 274,250 |  | 134,717
Consumer other | 78,676 |  | 82,260
Home equity lines of credit | 61,152 |  | 58,283
FDIC-supported loans, net of discounts (TeamBank) | 15,294 |  | 49,862
Acquired non-covered loans, net of discounts (TeamBank) | 28,341 |  | --
FDIC-supported loans, net of discounts (Vantus Bank) | 43,653 |  | 57,920
FDIC-supported loans, net of discounts (Sun Security Bank) | 54,394 |  | 64,843
FDIC-supported loans, net of discounts (InterBank) | 203,787 |  | 213,539
Acquired loans not covered by FDIC loss sharing agreements, net of |  |  |
discounts (Valley Bank) (“acquired non-covered loans”) | 152,497 |  | --
| 3,241,571 |  | 2,677,184
Undisbursed portion of loans in process | (279,435) |  | (194,544)
Allowance for loan losses | (38,081) |  | (40,116)
Deferred loan fees and gains, net | (2,745) |  | (2,994)
| $2,921,310 |  | $2,439,530
Weighted average interest rate | 4.78% |  | 5.10%
Classes of loans by aging were as follows:
| September 30, 2014
|  |  |  |  |  |  | Total Loans
|  |  | Past Due |  |  |  | > 90 Days
| 30-59 Days | 60-89 Days | 90 Days | Total Past |  | Total Loans | Past Due and
| Past Due | Past Due | or More | Due | Current | Receivable | Still Accruing
(In Thousands) |  |  |  |  |  |  |
One- to four-family |  |  |  |  |  |  |
residential construction | $-- | $-- | $223 | $223 | $43,163 | $43,386 | $--
Subdivision construction | -- | -- | 1,223 | 1,223 | 34,121 | 35,344 | --
Land development | -- | -- | 265 | 265 | 48,316 | 48,581 | --
Commercial construction | -- | -- | -- | -- | 361,971 | 361,971 | --
Owner occupied one- to four- |  |  |  |  |  |  |
family residential | 184 | 565 | 1,616 | 2,365 | 76,619 | 78,984 | 170
Non-owner occupied one- to |  |  |  |  |  |  |
four-family residential | -- | 168 | 2,997 | 3,165 | 140,249 | 143,414 | --
Commercial real estate | -- | 59 | 2,968 | 3,027 | 869,267 | 872,294 | --
Other residential | -- | -- | -- | -- | 353,225 | 353,225 | --
Commercial business | 21 | 13 | 427 | 461 | 348,926 | 349,387 | --
Industrial revenue bonds | -- | -- | 1,205 | 1,205 | 41,736 | 42,941 | --
Consumer auto | 144 | 1,331 | 131 | 1,606 | 272,644 | 274,250 | --
Consumer other | 168 | 1,025 | 649 | 1,842 | 76,834 | 78,676 | 244
Home equity lines of credit | 46 | 404 | 337 | 787 | 60,365 | 61,152 | --
FDIC-supported loans, net of |  |  |  |  |  |  |
discounts (TeamBank) | 65 | 115 | 415 | 595 | 14,699 | 15,294 | --
Acquired non-covered loans, |  |  |  |  |  |  |
net of discounts |  |  |  |  |  |  |
(TeamBank) | -- | -- | -- | -- | 28,341 | 28,341 | --
FDIC-supported loans, net of |  |  |  |  |  |  |
discounts (Vantus Bank) | 85 | 12 | 1,022 | 1,119 | 42,534 | 43,653 | 56
FDIC-supported loans, |  |  |  |  |  |  |
net of discounts |  |  |  |  |  |  |
(Sun Security Bank) | 353 | 149 | 2,714 | 3,216 | 51,178 | 54,394 | --
FDIC-supported loans, |  |  |  |  |  |  |
net of discounts |  |  |  |  |  |  |
(InterBank) | 696 | 1,375 | 14,731 | 16,802 | 186,985 | 203,787 | --
Acquired non-covered loans, |  |  |  |  |  |  |
net of discounts |  |  |  |  |  |  |
(Valley Bank) | 9,727 | 2,716 | 12,329 | 24,772 | 127,725 | 152,497 | --
| 11,489 | 7,932 | 43,252 | 62,673 | 3,278,898 | 3,241,571 | 470
Less FDIC-supported loans, |  |  |  |  |  |  |
and acquired non-covered |  |  |  |  |  |  |
loans, net of discounts | 10,926 | 4,367 | 31,211 | 46,504 | 451,462 | 497,966 | 56
Total | $563 | $3,565 | $12,041 | $16,169 | $2,727,436 | $2,743,605 | $414
| December 31, 2013
|  |  |  |  |  |  | Total Loans
|  |  | Past Due |  |  |  | > 90 Days
| 30-59 Days | 60-89 Days | 90 Days | Total Past |  | Total Loans | Past Due and
| Past Due | Past Due | or More | Due | Current | Receivable | Still Accruing
(In Thousands) |  |  |  |  |  |  |
One- to four-family |  |  |  |  |  |  |
residential construction | $-- | $-- | $-- | $-- | $34,662 | $34,662 | $--
Subdivision construction | -- | -- | 871 | 871 | 39,538 | 40,409 | --
Land development | 145 | 38 | 338 | 521 | 57,320 | 57,841 | --
Commercial construction | -- | -- | -- | -- | 184,019 | 184,019 | --
Owner occupied one- to four- |  |  |  |  |  |  |
family residential | 1,233 | 344 | 3,014 | 4,591 | 84,542 | 89,133 | 211
Non-owner occupied one- to |  |  |  |  |  |  |
four-family residential | 1,562 | 171 | 843 | 2,576 | 143,332 | 145,908 | 140
Commercial real estate | 2,856 | 131 | 6,205 | 9,192 | 771,498 | 780,690 | --
Other residential | -- | -- | -- | -- | 325,599 | 325,599 | --
Commercial business | 17 | 19 | 5,208 | 5,244 | 310,025 | 315,269 | --
Industrial revenue bonds | -- | -- | 2,023 | 2,023 | 40,207 | 42,230 | --
Consumer auto | 955 | 127 | 168 | 1,250 | 133,467 | 134,717 | --
Consumer other | 1,258 | 333 | 732 | 2,323 | 79,937 | 82,260 | 257
Home equity lines of credit | 168 | 16 | 504 | 688 | 57,595 | 58,283 | --
FDIC-supported loans, net of |  |  |  |  |  |  |
discounts (TeamBank) | 414 | 130 | 1,396 | 1,940 | 47,922 | 49,862 | 6
FDIC-supported loans, net of |  |  |  |  |  |  |
discounts (Vantus Bank) | 675 | 31 | 2,356 | 3,062 | 54,858 | 57,920 | 42
FDIC-supported loans, |  |  |  |  |  |  |
net of discounts |  |  |  |  |  |  |
(Sun Security Bank) | 510 | 121 | 4,241 | 4,872 | 59,971 | 64,843 | 147
FDIC-supported loans, net of |  |  |  |  |  |  |
discounts (InterBank) | 6,024 | 1,567 | 16,768 | 24,359 | 189,180 | 213,539 | 20
| 15,817 | 3,028 | 44,667 | 63,512 | 2,613,672 | 2,677,184 | 823
Less FDIC-supported loans, |  |  |  |  |  |  |
net of discounts | 7,623 | 1,849 | 24,761 | 34,233 | 351,931 | 386,164 | 215
Total | $8,194 | $1,179 | $19,906 | $29,279 | $2,261,741 | $2,291,020 | $608
Nonaccruing loans (excluding FDIC-supported loans, net of discount and acquired non-covered loans, net of discount) are summarized as follows:
| September 30, |  | December 31,
| 2014 |  | 2013
(In Thousands) |  |  |
One- to four-family residential construction | $223 |  | $--
Subdivision construction | 1,223 |  | 871
Land development | 265 |  | 338
Commercial construction | -- |  | --
Owner occupied one- to four-family residential | 1,446 |  | 2,803
Non-owner occupied one- to four-family residential | 2,997 |  | 703
Commercial real estate | 2,968 |  | 6,205
Other residential | -- |  | --
Commercial business | 1,632 |  | 5,208
Industrial revenue bonds | -- |  | 2,023
Consumer auto | 131 |  | 168
Consumer other | 405 |  | 475
Home equity lines of credit | 337 |  | 504
Total | $11,627 |  | $19,298
The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2014. Also presented is the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of September 30, 2014:
| One- to Four- |  |  |  |  |  |
| Family |  |  |  |  |  |
| Residential and | Other | Commercial | Commercial | Commercial |  |
| Construction | Residential | Real Estate | Construction | Business | Consumer | Total
(In Thousands) |  |  |  |  |  |  |
Allowance for loan losses |  |  |  |  |  |  |
Balance June 30, 2014 | $5,073 | $1,723 | $16,476 | $8,249 | $2,582 | $3,979 | $38,082
Provision (benefit) charged to expense | (1,647) | 545 | 2,838 | (2,499) | 632 | 1,076 | 945
Losses charged off | (106) | -- | (520) | (1) | (50) | (1,107) | (1,784)
Recoveries | 120 | 14 | 170 | 24 | -- | 510 | 838
Balance September 30, 2014 | $3,440 | $2,282 | $18,964 | $5,773 | $3,164 | $4,458 | $38,081
Balance January 1, 2014 | $6,235 | $2,678 | $16,939 | $4,464 | $6,451 | $3,349 | $40,116
Provision (benefit) charged to expense | (1,280) | (423) | 2,704 | 1,263 | (619) | 2,454 | 4,099
Losses charged off | (1,803) | (2) | (1,239) | (131) | (2,737) | (2,891) | (8,803)
Recoveries | 288 | 29 | 560 | 177 | 69 | 1,546 | 2,669
Balance September 30, 2014 | $3,440 | $2,282 | $18,964 | $5,773 | $3,164 | $4,458 | $38,081
Ending balance: |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |
impairment | $1,340 | $-- | $1,736 | $1,514 | $596 | $198 | $5,384
Collectively evaluated for |  |  |  |  |  |  |
impairment | $2,100 | $2,274 | $16,800 | $4,241 | $2,559 | $4,221 | $32,195
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC |  |  |  |  |  |  |
310-30 | $-- | $8 | $428 | $18 | $9 | $39 | $502
Loans |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |
impairment | $11,284 | $10,203 | $28,899 | $7,791 | $5,126 | $1,256 | $64,559
Collectively evaluated for |  |  |  |  |  |  |
impairment | $289,844 | $343,022 | $843,395 | $402,761 | $387,202 | $412,822 | $2,679,046
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC |  |  |  |  |  |  |
310-30 | $248,701 | $54,594 | $106,877 | $20,084 | $18,251 | $49,459 | $497,966
The following table presents the activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2013:
| One- to Four- |  |  |  |  |  |
| Family |  |  |  |  |  |
| Residential and | Other | Commercial | Commercial | Commercial |  |
| Construction | Residential | Real Estate | Construction | Business | Consumer | Total
(In Thousands) |  |  |  |  |  |  |
Allowance for loan losses |  |  |  |  |  |  |
Balance July 1, 2013 | $6,125 | $3,373 | $16,419 | $5,789 | $5,664 | $2,815 | $40,185
Provision (benefit) charged to expense | (234) | (372) | 1,474 | 1,291 | (1,732) | 2,250 | 2,677
Losses charged off | (847) | (201) | (608) | (346) | (1,303) | (2,215) | (5,520)
Recoveries | 87 | 6 | 888 | 50 | 648 | 435 | 2,114
Balance September 30, 2013 | $5,131 | $2,806 | $18,173 | $6,784 | $3,277 | $3,285 | $39,456
Balance January 1, 2013 | $6,822 | $4,327 | $17,441 | $3,938 | $5,096 | $3,025 | $40,649
Provision (benefit) charged to expense | 292 | 1,329 | 6,736 | 3,413 | 137 | 2,666 | 14,573
Losses charged off | (2,088) | (2,887) | (7,138) | (675) | (2,672) | (3,884) | (19,344)
Recoveries | 105 | 37 | 1,134 | 108 | 716 | 1,478 | 3,578
Balance September 30, 2013 | $5,131 | $2,806 | $18,173 | $6,784 | $3,277 | $3,285 | $39,456
The following table presents the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of December 31, 2013:
| One- to Four- |  |  |  |  |  |
| Family |  |  |  |  |  |
| Residential and | Other | Commercial | Commercial | Commercial |  |
| Construction | Residential | Real Estate | Construction | Business | Consumer | Total
(In Thousands) |  |  |  |  |  |  |
Allowance for loan losses |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |
impairment | $2,501 | $-- | $90 | $473 | $4,162 | $218 | $7,444
Collectively evaluated for |  |  |  |  |  |  |
impairment | $3,734 | $2,678 | $16,845 | $3,991 | $2,287 | $3,131 | $32,666
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC |  |  |  |  |  |  |
310-30 | $-- | $-- | $4 | $-- | $2 | $-- | $6
Loans |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |
impairment | $13,055 | $10,983 | $31,591 | $12,628 | $8,755 | $1,389 | $78,401
Collectively evaluated for |  |  |  |  |  |  |
impairment | $297,057 | $314,616 | $791,329 | $229,232 | $306,514 | $273,871 | $2,212,619
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC |  |  |  |  |  |  |
310-30 | $206,964 | $35,095 | $84,591 | $6,989 | $4,883 | $47,642 | $386,164
The portfolio segments used in the preceding two tables correspond to the loan classes used in all other tables in Note 7 as follows: · The one-to four-family residential and construction segment includes the one- to four-family residential construction, subdivision construction, owner occupied one- to four-family residential and non-owner occupied one- to four-family residential classes · The other residential segment corresponds to the other residential class · The commercial real estate segment includes the commercial real estate and industrial revenue bonds classes · The commercial construction segment includes the land development and commercial construction classes · The commercial business segment corresponds to the commercial business class · The consumer segment includes the consumer auto, consumer other and home equity lines of credit classes A loan is considered impaired, in accordance with the impairment accounting guidance (FASB ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include not only nonperforming loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. Impaired loans (excluding FDIC-supported loans, net of discount and acquired non-covered loans, net of discount), are summarized as follows:
| September 30, 2014
|  | Unpaid |  |
| Recorded | Principal | Specific |
| Balance | Balance | Allowance |
(In Thousands) |  |  |  |
One- to four-family residential construction | $-- | $-- | $-- |
Subdivision construction | 2,304 | 4,716 | 373 |
Land development | 7,791 | 8,224 | 1,514 |
Commercial construction | -- | -- | -- |
Owner occupied one- to four-family residential | 4,366 | 5,064 | 517 |
Non-owner occupied one- to four-family residential | 4,614 | 4,837 | 450 |
Commercial real estate | 28,899 | 30,210 | 1,736 |
Other residential | 10,203 | 10,203 | -- |
Commercial business | 2,150 | 2,173 | 596 |
Industrial revenue bonds | 2,976 | 4,288 | -- |
Consumer auto | 175 | 227 | 26 |
Consumer other | 635 | 764 | 95 |
Home equity lines of credit | 446 | 473 | 77 |
Total | $64,559 | $71,179 | $5,384 |
| Three Months Ended |  | Nine Months Ended
| September 30, 2014 |  | September 30, 2014
| Average |  |  | Average |
| Investment | Interest |  | Investment | Interest
| in Impaired | Income |  | in Impaired | Income
| Loans | Recognized |  | Loans | Recognized
(In Thousands) |  |  |  |  |
One- to four-family residential construction | $121 | $-- |  | $59 | $--
Subdivision construction | 2,207 | 8 |  | 2,549 | 38
Land development | 7,650 | 70 |  | 10,403 | 213
Commercial construction | -- | -- |  | -- | --
Owner occupied one- to four-family residential | 4,665 | 56 |  | 5,100 | 168
Non-owner occupied one- to four-family residential | 4,550 | 53 |  | 4,137 | 163
Commercial real estate | 29,531 | 298 |  | 30,204 | 988
Other residential | 10,304 | 86 |  | 10,665 | 296
Commercial business | 2,163 | 31 |  | 2,657 | 99
Industrial revenue bonds | 3,362 | 192 |  | 2,998 | 192
Consumer auto | 216 | 4 |  | 182 | 11
Consumer other | 678 | 15 |  | 690 | 57
Home equity lines of credit | 415 | 6 |  | 461 | 20
Total | $65,862 | $819 |  | $70,105 | $2,245
| At or for the Year Ended December 31, 2013
|  |  |  | Average |
|  | Unpaid |  | Investment | Interest
| Recorded | Principal | Specific | in Impaired | Income
| Balance | Balance | Allowance | Loans | Recognized
(In Thousands) |  |  |  |  |
One- to four-family residential construction | $-- | $-- | $-- | $36 | $--
Subdivision construction | 3,502 | 3,531 | 1,659 | 3,315 | 163
Land development | 12,628 | 13,042 | 473 | 13,389 | 560
Commercial construction | -- | -- | -- | -- | --
Owner occupied one- to four-family residential | 5,802 | 6,117 | 593 | 5,101 | 251
Non-owner occupied one- to four-family residential | 3,751 | 4,003 | 249 | 4,797 | 195
Commercial real estate | 31,591 | 34,032 | 90 | 42,242 | 1,632
Other residential | 10,983 | 10,983 | -- | 13,837 | 434
Commercial business | 6,057 | 6,077 | 4,162 | 6,821 | 179
Industrial revenue bonds | 2,698 | 2,778 | -- | 2,700 | 27
Consumer auto | 216 | 231 | 32 | 145 | 16
Consumer other | 604 | 700 | 91 | 630 | 63
Home equity lines of credit | 569 | 706 | 95 | 391 | 38
Total | $78,401 | $82,200 | $7,444 | $93,404 | $3,558
| September 30, 2013
|  | Unpaid |  |
| Recorded | Principal | Specific |
| Balance | Balance | Allowance |
(In Thousands) |  |  |  |
One- to four-family residential construction | $-- | $-- | $-- |
Subdivision construction | 3,785 | 3,896 | 851 |
Land development | 15,444 | 15,848 | 2,192 |
Commercial construction | -- | -- | -- |
Owner occupied one- to four-family residential | 5,174 | 5,393 | 430 |
Non-owner occupied one- to four-family residential | 4,351 | 5,233 | 369 |
Commercial real estate | 40,981 | 42,507 | 2,416 |
Other residential | 11,367 | 11,367 | 169 |
Commercial business | 6,138 | 6,140 | 1,512 |
Industrial revenue bonds | 2,698 | 2,778 | -- |
Consumer auto | 184 | 228 | 28 |
Consumer other | 595 | 664 | 89 |
Home equity lines of credit | 410 | 424 | 91 |
Total | $91,127 | $94,478 | $8,147 |
| Three Months Ended |  | Nine Months Ended
| September 30, 2013 |  | September 30, 2013
| Average |  |  | Average |
| Investment | Interest |  | Investment | Interest
| in Impaired | Income |  | in Impaired | Income
| Loans | Recognized |  | Loans | Recognized
(In Thousands) |  |  |  |  |
One- to four-family residential construction | $48 | $-- |  | $48 | $5
Subdivision construction | 4,062 | 34 |  | 3,206 | 140
Land development | 15,573 | 111 |  | 13,025 | 477
Commercial construction | -- | -- |  | -- | --
Owner occupied one- to four-family residential | 5,035 | 60 |  | 4,899 | 176
Non-owner occupied one- to four-family residential | 4,832 | 12 |  | 5,112 | 173
Commercial real estate | 40,792 | 506 |  | 44,374 | 1,246
Other residential | 11,444 | 136 |  | 14,895 | 353
Commercial business | 6,274 | 86 |  | 7,074 | 161
Industrial revenue bonds | 2,698 | -- |  | 2,701 | 14
Consumer auto | 153 | 7 |  | 130 | 11
Consumer other | 593 | 12 |  | 639 | 44
Home equity lines of credit | 333 | 10 |  | 316 | 20
Total | $91,837 | $974 |  | $96,419 | $2,820
At September 30, 2014, $25.1 million of impaired loans had specific valuation allowances totaling $5.4 million. At December 31, 2013, $18.0 million of impaired loans had specific valuation allowances totaling $7.4 million. Included in certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired. Troubled debt restructurings are loans that are modified by granting concessions to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection. The types of concessions made are factored into the estimation of the allowance for loan losses for troubled debt restructurings primarily using a discounted cash flows or collateral adequacy approach. The following tables present newly restructured loans during the three and nine months ended September 30, 2014 by type of modification:
| Three Months Ended September 30, 2014
|  |  |  | Total
| Interest Only | Term | Combination | Modification
(In Thousands) |  |  |  |
Mortgage loans on real estate: |  |  |  |
One -to four- family residential | $308 | $-- | $-- | $308
One -to four- family residential |  |  |  |
construction | -- | -- | 223 | 223
Commercial business | -- | 243 | -- | 243
Consumer | -- | 6 | -- | 6
| $308 | $249 | $223 | $780
| Nine Months Ended September 30, 2014
|  |  |  | Total
| Interest Only | Term | Combination | Modification
(In Thousands) |  |  |  |
Mortgage loans on real estate: |  |  |  |
Subdivision construction | $-- | $250 | $-- | $250
One -to four- family residential |  |  |  |
construction | -- | -- | 223 | 223
One -to four- family residential | 308 | 386 | -- | 694
Commercial real estate | 506 | 1,929 | -- | 2,435
Commercial business | -- | 1,881 | -- | 1,881
Industrial revenue bonds | -- | 1,150 | -- | 1,150
Consumer | -- | 59 | -- | 59
| $814 | $5,655 | $223 | $6,692
At September 30, 2014, the Company had $52.1 million of loans that were modified in troubled debt restructurings and impaired, as follows: $8.6 million of construction and land development loans, $15.6 million of single family and multi-family residential mortgage loans, $23.9 million of commercial real estate loans, $3.7 million of commercial business loans and $250,000 of consumer loans. Of the total troubled debt restructurings at September 30, 2014, $47.4 million were accruing interest and $19.8 million were classified as substandard using the Company’s internal grading system, which is described below. The Company had no troubled debt restructurings which were modified in the previous 12 months and subsequently defaulted during the nine months ended September 30, 2014. When loans modified as troubled debt restructuring have subsequent payment defaults, the defaults are factored into the determination of the allowance for loan losses to ensure specific valuation allowances reflect amounts considered uncollectible. At December 31, 2013, the Company had $10.9 million of construction and land development loans, $16.6 million of single family and multi-family residential mortgage loans, $24.8 million of commercial real estate loans, $1.5 million of commercial business loans and $310,000 of consumer loans that were modified in troubled debt restructurings and impaired. Of the troubled debt restructurings totaling $54.1 million at December 31, 2013, $49.6 million were accruing interest and $22.1 million were classified as substandard using the Company’s internal grading system. During the three months ended September 30, 2014, loans designated as troubled debt restructurings totaling $1.4 million met the criteria for placement back on accrual status. The $1.4 million was made up of $1.4 million of commercial real estate loans and $6,000 of consumer loans. During the nine months ended September 30, 2014, loans designated as troubled debt restructurings totaling $2.1 million met the criteria for placement back on accrual status. The $2.1 million was made up of $1.5 million of commercial real estate loans, $591,000 of residential mortgage loans and $6,000 of consumer loans. The Company reviews the credit quality of its loan portfolio using an internal grading system that classifies loans as “Satisfactory,” “Watch,” “Special Mention,” “Substandard” and “Doubtful.” Substandard loans are characterized by the distinct possibility that the Bank will sustain some loss if certain deficiencies are not corrected. Doubtful loans are those having all the weaknesses inherent to those classified Substandard with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Special mention loans possess potential weaknesses that deserve management’s close attention but do not expose the Bank to a degree of risk that warrants substandard classification. Loans classified as watch are being monitored because of indications of potential weaknesses or deficiencies that may require future classification as special mention or substandard. Loans not meeting any of the criteria previously described are considered satisfactory. The FDIC-covered loans are evaluated using this internal grading system. These loans are accounted for in pools and are currently substantially covered through loss sharing agreements with the FDIC. Minimal adverse classification in the loan pools was identified as of September 30, 2014 and December 31, 2013, respectively. The acquired non-covered loans are also evaluated using this internal grading system. These loans are accounted for in pools and minimal adverse classification in the loan pools was identified as of September 30, 2014. See Note 8 for further discussion of the acquired loan pools and loss sharing agreements. The loan grading system is presented by loan class below:
|  | September 30, 2014
|  |  | Special |  |  |
| Satisfactory | Watch | Mention | Substandard | Doubtful | Total
(In Thousands) |  |  |  |  |  |
One- to four-family residential |  |  |  |  |  |
construction | $43,163 | $-- | $-- | $223 | $-- | $43,386
Subdivision construction | 33,310 | 21 | -- | 2,013 | -- | 35,344
Land development | 37,514 | 5,000 | -- | 6,067 | -- | 48,581
Commercial construction | 361,971 | -- | -- | -- | -- | 361,971
Owner occupied one- to four- |  |  |  |  |  |
family residential | 76,166 | 611 | -- | 2,207 | -- | 78,984
Non-owner occupied one- to four- |  |  |  |  |  |
family residential | 139,070 | 350 | -- | 3,994 | -- | 143,414
Commercial real estate | 808,064 | 51,967 | -- | 12,263 | -- | 872,294
Other residential | 341,224 | 10,045 | -- | 1,956 | -- | 353,225
Commercial business | 347,691 | 446 | -- | 1,250 | -- | 349,387
Industrial revenue bonds | 41,114 | 622 | -- | 1,205 | -- | 42,941
Consumer auto | 274,079 | -- | -- | 171 | -- | 274,250
Consumer other | 78,149 | 4 | -- | 523 | -- | 78,676
Home equity lines of credit | 60,707 | -- | -- | 445 | -- | 61,152
FDIC-supported loans, net of |  |  |  |  |  |
discounts (TeamBank) | 15,275 | -- | -- | 19 | -- | 15,294
Acquired non--covered loans, net |  |  |  |  |  |
of discounts (TeamBank) | 28,333 | -- | -- | 8 | -- | 28,341
FDIC-supported loans, net of |  |  |  |  |  |
discounts (Vantus Bank) | 43,252 | -- | -- | 401 | -- | 43,653
FDIC-supported loans, net of |  |  |  |  |  |
discounts (Sun Security Bank) | 53,859 | -- | -- | 535 | -- | 54,394
FDIC-supported loans, net of |  |  |  |  |  |
discounts (InterBank) | 202,904 | -- | -- | 883 | -- | 203,787
Acquired non-covered loans, |  |  |  |  |  |
net of discounts (Valley Bank) | 152,497 | -- | -- | -- | -- | 152,497
Total | $3,138,342 | $69,066 | $-- | $34,163 | $-- | $3,241,571
|  | December 31, 2013
|  |  | Special |  |  |
| Satisfactory | Watch | Mention | Substandard | Doubtful | Total
(In Thousands) |  |  |  |  |  |
One- to four-family residential |  |  |  |  |  |
construction | $34,364 | $298 | $-- | $-- | $-- | $34,662
Subdivision construction | 36,524 | 706 | -- | 3,179 | -- | 40,409
Land development | 45,606 | 1,148 | -- | 11,087 | -- | 57,841
Commercial construction | 184,019 | -- | -- | -- | -- | 184,019
Owner occupied one- to four- |  |  |  |  |  |
family residential | 84,931 | 503 | -- | 3,699 | -- | 89,133
Non-owner occupied one- to four- |  |  |  |  |  |
family residential | 137,003 | 6,718 | -- | 2,187 | -- | 145,908
Commercial real estate | 727,668 | 37,937 | -- | 15,085 | -- | 780,690
Other residential | 311,320 | 12,323 | -- | 1,956 | -- | 325,599
Commercial business | 307,540 | 1,803 | -- | 3,528 | 2,398 | 315,269
Industrial revenue bonds | 39,532 | 675 | -- | 2,023 | -- | 42,230
Consumer auto | 134,516 | -- | -- | 201 | -- | 134,717
Consumer other | 81,769 | 6 | -- | 485 | -- | 82,260
Home equity lines of credit | 57,713 | -- | -- | 570 | -- | 58,283
FDIC-supported loans, net of |  |  |  |  |  |
Discounts (TeamBank) | 49,702 | -- | -- | 160 | -- | 49,862
FDIC-supported loans, net of |  |  |  |  |  |
discounts (Vantus Bank) | 57,290 | -- | -- | 630 | -- | 57,920
FDIC-supported loans, net of |  |  |  |  |  |
discounts (Sun Security Bank) | 63,360 | -- | -- | 1,483 | -- | 64,843
FDIC-supported loans, net of |  |  |  |  |  |
discounts (InterBank) | 213,539 | -- | -- | -- | -- | 213,539
Total | $2,566,396 | $62,117 | $-- | $46,273 | $2,398 | $2,677,184

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