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Note 3: Loans and Allowance For Loan Losses | 12 Months Ended
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Dec. 31, 2017
Notes |
Note 3: Loans and Allowance For Loan Losses | Note 3: Loans and Allowance for Loan Losses Classes of loans at December 31, 2017 and 2016, included:
| 2017 |  | 2016
| (In Thousands)
One- to four-family residential construction | $ 20,793 |  | $ 21,737
Subdivision construction | 18,062 |  | 17,186
Land development | 43,971 |  | 50,624
Commercial construction | 1,068,352 |  | 780,614
Owner occupied one- to four-family residential | 190,515 |  | 200,340
Non-owner occupied one- to four-family residential | 119,468 |  | 136,924
Commercial real estate | 1,235,329 |  | 1,186,906
Other residential | 745,645 |  | 663,378
Commercial business | 353,351 |  | 348,628
Industrial revenue bonds | 21,859 |  | 25,065
Consumer auto | 357,142 |  | 494,233
Consumer other | 63,368 |  | 70,001
Home equity lines of credit | 115,439 |  | 108,753
Acquired FDIC-covered loans, net of discounts | -- |  | 134,356
Acquired loans no longer covered by FDIC loss sharing |  |  |
agreements, net of discounts | 155,224 |  | 72,569
Acquired non-covered loans, net of discounts | 54,445 |  | 76,234
| 4,562,963 |  | 4,387,548
Undisbursed portion of loans in process | (793,669) |  | (585,313)
Allowance for loan losses | (36,492) |  | (37,400)
Deferred loan fees and gains, net | (6,500) |  | (4,869)
| $ 3,726,302 |  | $ 3,759,966
Classes of loans by aging were as follows:
| December 31, 2017
|  |  |  |  |  |  | Total Loans
|  |  |  |  |  | Total | > 90 Days
| 30-59 Days | 60-89 Days | Over 90 | Total Past |  | Loans | Past Due and
| Past Due | Past Due | Days | Due | Current | Receivable | Still Accruing
| (In Thousands)
One- to four-family |  |  |  |  |  |  |
residential construction | $ 250 | $ -- | $ -- | $ 250 | $ 20,543 | $ 20,793 | $ --
Subdivision construction | -- | -- | 98 | 98 | 17,964 | 18,062 | --
Land development | 54 | 37 | -- | 91 | 43,880 | 43,971 | --
Commercial construction | -- | -- | -- | -- | 1,068,352 | 1,068,352 | --
Owner occupied one- to four- |  |  |  |  |  |  |
family residential | 1,927 | 71 | 904 | 2,902 | 187,613 | 190,515 | --
Non-owner occupied one- to |  |  |  |  |  |  |
four-family residential | 947 | 190 | 1,816 | 2,953 | 116,515 | 119,468 | 58
Commercial real estate | 8,346 | 993 | 1,226 | 10,565 | 1,224,764 | 1,235,329 | --
Other residential | 540 | 353 | 1,877 | 2,770 | 742,875 | 745,645 | --
Commercial business | 2,623 | 1,282 | 2,063 | 5,968 | 347,383 | 353,351 | --
Industrial revenue bonds | -- | -- | -- | -- | 21,859 | 21,859 | --
Consumer auto | 5,196 | 1,230 | 2,284 | 8,710 | 348,432 | 357,142 | 12
Consumer other | 464 | 64 | 557 | 1,085 | 62,283 | 63,368 | --
Home equity lines of credit | 58 | -- | 430 | 488 | 114,951 | 115,439 | 26
Acquired loans no longer covered by FDIC loss sharing agreements, |  |  |  |  |  |  |
net of discounts | 4,015 | 1,774 | 7,847 | 13,636 | 141,588 | 155,224 | 116
Acquired non-covered loans, net of discounts | 434 | 177 | 2,828 | 3,439 | 51,006 | 54,445 | 156
| 24,854 | 6,171 | 21,930 | 52,955 | 4,510,008 | 4,562,963 | 368
Less acquired loans no longer |  |  |  |  |  |  |
covered by FDIC loss sharing agreements and acquired non-covered loans, net of discounts | 4,449 | 1,951 | 10,675 | 17,075 | 192,594 | 209,669 | 272
Total | $ 20,405 | $ 4,220 | $ 11,255 | $ 35,880 | $ 4,317,414 | $ 4,353,294 | $ 96
| December 31, 2016
|  |  |  |  |  |  | Total Loans
|  |  |  |  |  | Total | > 90 Days Past
| 30-59 Days | 60-89 Days | Over 90 | Total Past |  | Loans | Due and
| Past Due | Past Due | Days | Due | Current | Receivable | Still Accruing
| (In Thousands)
One- to four-family |  |  |  |  |  |  |
residential construction | $ -- | $ -- | $ -- | $ -- | $ 21,737 | $ 21,737 | $ --
Subdivision construction | -- | -- | 109 | 109 | 17,077 | 17,186 | --
Land development | 413 | 584 | 1,718 | 2,715 | 47,909 | 50,624 | --
Commercial construction | -- | -- | -- | -- | 780,614 | 780,614 | --
Owner occupied one- to four- |  |  |  |  |  |  |
family residential | 1,760 | 388 | 1,125 | 3,273 | 197,067 | 200,340 | --
Non-owner occupied one- to |  |  |  |  |  |  |
four-family residential | 309 | 278 | 404 | 991 | 135,933 | 136,924 | --
Commercial real estate | 1,969 | 1,988 | 4,404 | 8,361 | 1,178,545 | 1,186,906 | --
Other residential | 4,632 | -- | 162 | 4,794 | 658,584 | 663,378 | --
Commercial business | 1,741 | 24 | 3,088 | 4,853 | 343,775 | 348,628 | --
Industrial revenue bonds | -- | -- | -- | -- | 25,065 | 25,065 | --
Consumer auto | 8,252 | 2,451 | 1,989 | 12,692 | 481,541 | 494,233 | --
Consumer other | 1,103 | 278 | 649 | 2,030 | 67,971 | 70,001 | --
Home equity lines of credit | 136 | 158 | 433 | 727 | 108,026 | 108,753 | --
Acquired FDIC-covered loans, net of discounts | 4,476 | 1,201 | 8,226 | 13,903 | 120,453 | 134,356 | 301
Acquired loans no longer covered by FDIC loss sharing agreements, |  |  |  |  |  |  |
net of discounts | 1,356 | 552 | 1,401 | 3,309 | 69,260 | 72,569 | 222
Acquired non-covered loans, net of discounts | 851 | 173 | 2,854 | 3,878 | 72,356 | 76,234 | --
| 26,998 | 8,075 | 26,562 | 61,635 | 4,325,913 | 4,387,548 | 523
Less FDIC-supported loans, |  |  |  |  |  |  |
and acquired non-covered loans, net of discounts | 6,683 | 1,926 | 12,481 | 21,090 | 262,069 | 283,159 | 523
Total | $ 20,315 | $ 6,149 | $ 14,081 | $ 40,545 | $ 4,063,844 | $ 4,104,389 | $ --
Nonaccruing loans are summarized as follows:
| December 31,
| 2017 |  | 2016
| (In Thousands)
One- to four-family residential construction | $ -- |  | $ --
Subdivision construction | 98 |  | 109
Land development | -- |  | 1,718
Commercial construction | -- |  | --
Owner occupied one- to four-family residential | 904 |  | 1,125
Non-owner occupied one- to four-family |  |  |
residential | 1,758 |  | 404
Commercial real estate | 1,226 |  | 2,727
Other residential | 1,877 |  | 162
Commercial business | 2,063 |  | 4,765
Industrial revenue bonds | -- |  | --
Consumer auto | 2,272 |  | 1,989
Consumer other | 557 |  | 649
Home equity lines of credit | 404 |  | 433
Total | $ 11,159 |  | $ 14,081
The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2017, 2016 and 2015, respectively. Also presented are the balance in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method as of the years ended December 31, 2017, 2016, and 2015, respectively:
| December 31, 2017
| 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, January 1, 2017 | $ 2,322 | $ 5,486 | $ 15,938 | $ 2,284 | $ 3,015 | $ 8,355 | $ 37,400
Provision (benefit) charged to expense | (158) | (2,356) | 4,234 | (643) | 1,475 | 6,548 | 9,100
Losses charged off | (165) | (488) | (1,656) | (420) | (1,489) | (11,859) | (16,077)
Recoveries | 109 | 197 | 123 | 546 | 580 | 4,514 | 6,069
Balance, |  |  |  |  |  |  |
December 31, 2017 | $ 2,108 | $ 2,839 | $ 18,639 | $ 1,767 | $ 3,581 | $ 7,558 | $ 36,492
Ending balance: |  |  |  |  |  |  |
Individually evaluated |  |  |  |  |  |  |
for impairment | $ 513 | $ -- | $ 599 | $ -- | $ 2,140 | $ 699 | $ 3,951
Collectively evaluated |  |  |  |  |  |  |
for impairment | $ 1,564 | $ 2,813 | $ 17,843 | $ 1,690 | $ 1,369 | $ 6,802 | $ 32,081
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30 | $ 31 | $ 26 | $ 197 | $ 77 | $ 72 | $ 57 | $ 460
Loans |  |  |  |  |  |  |
Individually evaluated |  |  |  |  |  |  |
for impairment | $ 6,950 | $ 2,907 | $ 8,315 | $ 15 | $ 3,018 | $ 4,129 | $ 25,334
Collectively evaluated |  |  |  |  |  |  |
for impairment | $ 341,888 | $ 742,738 | $ 1,227,014 | $ 1,112,308 | $ 372,192 | $ 531,820 | $ 4,327,960
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30 | $ 120,295 | $ 14,877 | $ 39,210 | $ 3,806 | $ 5,275 | $ 26,206 | $ 209,669
| December 31, 2016
| 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, January 1, 2016 | $ 4,900 | $ 3,190 | $ 14,738 | $ 3,019 | $ 4,203 | $ 8,099 | $ 38,149
Provision (benefit) charged to expense | (2,407) | 2,260 | 5,632 | (827) | (926) | 5,549 | 9,281
Losses charged off | (229) | (16) | (5,653) | (31) | (589) | (8,751) | (15,269)
Recoveries | 58 | 52 | 1,221 | 123 | 327 | 3,458 | 5,239
Balance, |  |  |  |  |  |  |
December 31, 2016 | $ 2,322 | $ 5,486 | $ 15,938 | $ 2,284 | $ 3,015 | $ 8,355 | $ 37,400
Ending balance: |  |  |  |  |  |  |
Individually evaluated |  |  |  |  |  |  |
for impairment | $ 570 | $ -- | $ 2,209 | $ 1,291 | $ 1,295 | $ 997 | $ 6,362
Collectively evaluated |  |  |  |  |  |  |
for impairment | $ 1,628 | $ 5,396 | $ 13,507 | $ 953 | $ 1,681 | $ 7,248 | $ 30,413
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30 | $ 124 | $ 90 | $ 222 | $ 40 | $ 39 | $ 110 | $ 625
Loans |  |  |  |  |  |  |
Individually evaluated |  |  |  |  |  |  |
for impairment | $ 6,015 | $ 3,812 | $ 10,507 | $ 6,023 | $ 4,539 | $ 3,385 | $ 34,281
Collectively evaluated |  |  |  |  |  |  |
for impairment | $ 370,172 | $ 659,566 | $ 1,176,399 | $ 825,215 | $ 369,154 | $ 669,602 | $ 4,070,108
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30 | $ 155,378 | $ 29,600 | $ 54,208 | $ 2,191 | $ 6,429 | $ 35,353 | $ 283,159
| December 31, 2015
| 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, January 1, 2015 | $ 3,455 | $ 2,941 | $ 19,773 | $ 3,562 | $ 3,679 | $ 5,025 | $ 38,435
Provision (benefit) charged to expense | 1,428 | 193 | (2,753) | (619) | 1,450 | 5,820 | 5,519
Losses charged off | (80) | (2) | (2,584) | (329) | (1,202) | (5,315) | (9,512)
Recoveries | 97 | 58 | 302 | 405 | 276 | 2,569 | 3,707
Balance, |  |  |  |  |  |  |
December 31, 2015 | $ 4,900 | $ 3,190 | $ 14,738 | $ 3,019 | $ 4,203 | $ 8,099 | $ 38,149
Ending balance: |  |  |  |  |  |  |
Individually evaluated |  |  |  |  |  |  |
for impairment | $ 731 | $ -- | $ 2,556 | $ 1,391 | $ 1,115 | $ 300 | $ 6,093
Collectively evaluated |  |  |  |  |  |  |
for impairment | $ 3,464 | $ 3,122 | $ 11,888 | $ 1,570 | $ 2,862 | $ 7,647 | $ 30,553
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30 | $ 705 | $ 68 | $ 294 | $ 58 | $ 226 | $ 152 | $ 1,503
Loans |  |  |  |  |  |  |
Individually evaluated |  |  |  |  |  |  |
for impairment | $ 6,129 | $ 9,533 | $ 34,629 | $ 7,555 | $ 2,365 | $ 1,950 | $ 62,161
Collectively evaluated |  |  |  |  |  |  |
for impairment | $ 316,052 | $ 410,016 | $ 1,008,845 | $ 651,679 | $ 392,577 | $ 596,740 | $ 3,375,909
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30 | $ 194,697 | $ 35,945 | $ 73,148 | $ 4,981 | $ 10,500 | $ 43,574 | $ 362,845
The portfolio segments used in the preceding three tables correspond to the loan classes used in all other tables in Note 3 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. The weighted average interest rate on loans receivable at December 31, 2017 and 2016, was 4.74% and 4.58%, respectively. Loans serviced for others are not included in the accompanying consolidated statements of financial condition. The unpaid principal balances of loans serviced for others were $254.0 million and $266.2 million at December 31, 2017 and 2016, respectively. In addition, available lines of credit on these loans were $37.8 million and $60.5 million at December 31, 2017 and 2016, respectively. 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 loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. The following summarizes information regarding impaired loans at and during the years ended December 31, 2017, 2016 and 2015:
|  |  |  | Year Ended
|  | December 31, 2017 |  | December 31, 2017
|  |  |  |  | Average |  |
|  | Unpaid |  |  | Investment | Interest |
| Recorded | Principal | Specific |  | in Impaired | Income |
| Balance | Balance | Allowance |  | Loans | Recognized |
| (In Thousands) |
One- to four-family residential construction | $ -- | $ -- | $ -- |  | $ 193 | $ -- |
Subdivision construction | 349 | 367 | 114 |  | 584 | 22 |
Land development | 15 | 18 | -- |  | 1,793 | 24 |
Commercial construction | -- | -- | -- |  | -- | -- |
Owner occupied one- to four-family |  |  |  |  |  |  |
residential | 3,405 | 3,723 | 331 |  | 3,405 | 166 |
Non-owner occupied one- to four-family |  |  |  |  |  |  |
residential | 3,196 | 3,465 | 68 |  | 2,419 | 165 |
Commercial real estate | 8,315 | 8,490 | 599 |  | 9,075 | 567 |
Other residential | 2,907 | 2,907 | -- |  | 3,553 | 147 |
Commercial business | 3,018 | 4,222 | 2,140 |  | 5,384 | 173 |
Industrial revenue bonds | -- | -- | -- |  | -- | -- |
Consumer auto | 2,713 | 2,898 | 484 |  | 2,383 | 222 |
Consumer other | 825 | 917 | 124 |  | 906 | 69 |
Home equity lines of credit | 591 | 648 | 91 |  | 498 | 33 |
Total | $ 25,334 | $ 27,655 | $ 3,951 |  | $ 30,193 | $ 1,588 |
|  |  | Year Ended
| December 31, 2016 |  | December 31, 2016
|  |  |  |  | Average |
|  | Unpaid |  |  | Investment | Interest
| Recorded | Principal | Specific |  | in Impaired | Income
| Balance | Balance | Allowance |  | Loans | Recognized
| (In Thousands)
One- to four-family residential construction | $ -- | $ -- | $ -- |  | $ -- | $ --
Subdivision construction | 818 | 829 | 131 |  | 948 | 46
Land development | 6,023 | 6,120 | 1,291 |  | 8,020 | 304
Commercial construction | -- | -- | -- |  | -- | --
Owner occupied one- to four-family |  |  |  |  |  |
residential | 3,290 | 3,555 | 374 |  | 3,267 | 182
Non-owner occupied one- to four-family |  |  |  |  |  |
residential | 1,907 | 2,177 | 65 |  | 1,886 | 113
Commercial real estate | 10,507 | 12,121 | 2,209 |  | 23,928 | 984
Other residential | 3,812 | 3,812 | -- |  | 6,813 | 258
Commercial business | 4,539 | 4,652 | 1,295 |  | 2,542 | 185
Industrial revenue bonds | -- | -- | -- |  | -- | --
Consumer auto | 2,097 | 2,178 | 629 |  | 1,307 | 141
Consumer other | 812 | 887 | 244 |  | 884 | 70
Home equity lines of credit | 476 | 492 | 124 |  | 417 | 32
Total | $ 34,281 | $ 36,823 | $ 6,362 |  | $ 50,012 | $ 2,315
|  |  | Year Ended
| December 31, 2015 |  | December 31, 2015
|  |  |  |  | Average |
|  | Unpaid |  |  | Investment | Interest
| Recorded | Principal | Specific |  | in Impaired | Income
| Balance | Balance | Allowance |  | Loans | Recognized
| (In Thousands)
One- to four-family residential construction | $ -- | $ -- | $ -- |  | $ 633 | $ 35
Subdivision construction | 1,061 | 1,061 | 214 |  | 3,533 | 109
Land development | 7,555 | 7,644 | 1,391 |  | 7,432 | 287
Commercial construction | -- | -- | -- |  | -- | --
Owner occupied one- to four-family |  |  |  |  |  |
residential | 3,166 | 3,427 | 389 |  | 3,587 | 179
Non-owner occupied one- to four-family |  |  |  |  |  |
residential | 1,902 | 2,138 | 128 |  | 1,769 | 100
Commercial real estate | 34,629 | 37,259 | 2,556 |  | 28,610 | 1,594
Other residential | 9,533 | 9,533 | -- |  | 9,670 | 378
Commercial business | 2,365 | 2,539 | 1,115 |  | 2,268 | 138
Industrial revenue bonds | -- | -- | -- |  | -- | --
Consumer auto | 791 | 829 | 119 |  | 576 | 59
Consumer other | 802 | 885 | 120 |  | 672 | 74
Home equity lines of credit | 357 | 374 | 61 |  | 403 | 27
Total | $ 62,161 | $ 65,689 | $ 6,093 |  | $ 59,153 | $ 2,980
At December 31, 2017, $12.7 million of impaired loans had specific valuation allowances totaling $4.0 million. At December 31, 2016, $18.1 million of impaired loans had specific valuation allowances totaling $6.4 million. At December 31, 2015, $25.1 million of impaired loans had specific valuation allowances totaling $6.1 million. For impaired loans which were nonaccruing, interest of approximately $1.2 million, $1.5 million and $1.0 million would have been recognized on an accrual basis during the years ended December 31, 2017, 2016 and 2015, respectively. 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 table presents newly restructured loans during 2017, 2016 and 2015 by type of modification:
| 2017
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Mortgage loans on real estate: |  |  |  |
Commercial | $ -- | $ -- | $ 5,759 | $ 5,759
Commercial business | -- | 16 | 274 | 290
Consumer | -- | 245 | -- | 245
| $ -- | $ 261 | $ 6,033 | $ 6,294
| 2016
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Mortgage loans on real estate: |  |  |  |
Residential one-to-four family | $ 60 | $ -- | $ -- | $ 60
Commercial | 2,946 | -- | -- | 2,946
Construction and land development | 429 | -- | -- | 429 |
Commercial business | -- | 38 | -- | 38
Consumer | -- | 59 | -- | 59
| $ 3,435 | $ 97 | $ -- | $ 3,532
| 2015
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Mortgage loans on real estate: |  |  |  |
Residential one-to-four family | $ -- | $ 407 | $ 164 | $ 571
Commercial | -- | 115 | -- | 115
Commercial business | -- | 1,095 | -- | 1,095
Consumer | -- | 97 | -- | 97
| $ -- | $ 1,714 | $ 164 | $ 1,878
At December 31, 2017, the Company had $15.0 million of loans that were modified in troubled debt restructurings and impaired, as follows: $266,000 of construction and land development loans, $6.2 million of single family and multi-family residential mortgage loans, $7.1 million of commercial real estate loans, $867,000 million of commercial business loans and $617,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2017, $12.3 million were accruing interest and $8.8 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 year ended December 31, 2017. 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, 2016, the Company had $21.1 million of loans that were modified in troubled debt restructurings and impaired, as follows: $5.0 million of construction and land development loans, $7.4 million of single family and multi-family residential mortgage loans, $7.1 million of commercial real estate loans, $1.3 million of commercial business loans and $296,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2016, $18.6 million were accruing interest and $7.9 million were classified as substandard using the Company’s internal grading system. At December 31, 2015, the Company had $45.0 million of loans that were modified in troubled debt restructurings and impaired, as follows: $7.9 million of construction and land development loans, $13.5 million of single family and multi-family residential mortgage loans, $21.3 million of commercial real estate loans, $2.0 million of commercial business loans and $311,000 of consumer loans. Of the total troubled debt restructurings at December 31, 2015, $39.0 million were accruing interest and $12.2 million were classified as substandard using the Company’s internal grading system. During the year ended December 31, 2017, borrowers with loans designated as troubled debt restructurings totaling $998,000 met the criteria for placement back on accrual status. This criteria is generally a minimum of six months of consistent and timely payment performance under original or modified terms. The $998,000 was made up of $629,000 of residential mortgage loans, $285,000 of commercial real estate loans and $84,000 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.” 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. 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. 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. Loans not meeting any of the criteria previously described are considered satisfactory. The FDIC-assisted acquired loans are evaluated using this internal grading system. These loans are accounted for in pools. Minimal adverse classification in these acquired loan pools was identified as of December 31, 2017 and 2016, respectively. See Note 4 for further discussion of the acquired loan pools and termination of the loss sharing agreements. The Company evaluates the loan risk internal grading system definitions and allowance for loan loss methodology on an ongoing basis. The general component of the allowance for loan losses is affected by several factors, including, but not limited to, average historical losses, average life of the loans, the current composition of the loan portfolio, current and expected economic conditions, collateral values and internal risk ratings. Management considers all these factors in determining the adequacy of the Company’s allowance for loan losses. No significant changes were made to the loan risk grading system definitions and allowance for loan loss methodology during the past year. The loan grading system is presented by loan class below:
| December 31, 2017
|  |  | Special |  |  |
| Satisfactory | Watch | Mention | Substandard | Doubtful | Total
| (In Thousands)
One- to four-family residential |  |  |  |  |  |
construction | $ 20,275 | $ 518 | $ -- | $ -- | $ -- | $ 20,793
Subdivision construction | 15,602 | 2,362 | -- | 98 | -- | 18,062
Land development | 39,171 | 4,800 | -- | -- | -- | 43,971
Commercial construction | 1,068,352 | -- | -- | -- | -- | 1,068,352
Owner occupied one- to-four- |  |  |  |  |  |
family residential | 188,706 | -- | -- | 1,809 | -- | 190,515
Non-owner occupied one- to- |  |  |  |  |  |
four-family residential | 117,103 | 389 | -- | 1,976 | -- | 119,468
Commercial real estate | 1,218,431 | 9,909 | -- | 6,989 | -- | 1,235,329
Other residential | 742,237 | 1,532 | -- | 1,876 | -- | 745,645
Commercial business | 344,479 | 6,306 | -- | 2,066 | 500 | 353,351
Industrial revenue bonds | 21,859 | -- | -- | -- | -- | 21,859
Consumer auto | 354,588 | -- | -- | 2,554 | -- | 357,142
Consumer other | 62,682 | -- | -- | 686 | -- | 63,368
Home equity lines of credit | 114,860 | -- | -- | 579 | -- | 115,439
Acquired loans no longer covered |  |  |  |  |  |
by FDIC loss sharing |  |  |  |  |  |
agreements, net of discounts | 155,212 | -- | -- | 12 | -- | 155,224
Acquired non-covered loans, |  |  |  |  |  |
net of discounts | 54,445 | -- | -- | -- | -- | 54,445
Total | $ 4,518,002 | $ 25,816 | $ -- | $ 18,645 | $ 500 | $ 4,562,963
| December 31, 2016
|  |  | Special |  |  |
| Satisfactory | Watch | Mention | Substandard | Doubtful | Total
| (In Thousands)
One- to four-family residential |  |  |  |  |  |
construction | $ 20,771 | $ 966 | $ -- | $ -- | $ -- | $ 21,737
Subdivision construction | 14,059 | 2,729 | -- | 398 | -- | 17,186
Land development | 39,925 | 5,140 | -- | 5,559 | -- | 50,624
Commercial construction | 780,614 | -- | -- | -- | -- | 780,614
Owner occupied one- to-four- |  |  |  |  |  |
family residential | 198,835 | 67 | -- | 1,438 | -- | 200,340
Non-owner occupied one- to- |  |  |  |  |  |
four-family residential | 135,930 | 465 | -- | 529 | -- | 136,924
Commercial real estate | 1,160,280 | 20,154 | -- | 6,472 | -- | 1,186,906
Other residential | 658,846 | 4,370 | -- | 162 | -- | 663,378
Commercial business | 342,685 | 2,651 | -- | 3,292 | -- | 348,628
Industrial revenue bonds | 25,065 | -- | -- | -- | -- | 25,065
Consumer auto | 492,165 | -- | -- | 2,068 | -- | 494,233
Consumer other | 69,338 | -- | -- | 663 | -- | 70,001
Home equity lines of credit | 108,290 | -- | -- | 463 | -- | 108,753
Acquired FDIC-covered loans, |  |  |  |  |  |
net of discounts | 134,356 | -- | -- | -- | -- | 134,356
Acquired loans no longer covered |  |  |  |  |  |
by FDIC loss sharing |  |  |  |  |  |
agreements, net of discounts | 72,552 | -- | -- | 17 | -- | 72,569
Acquired non-covered loans, |  |  |  |  |  |
net of discounts | 76,234 | -- | -- | -- | -- | 76,234
Total | $ 4,329,945 | $ 36,542 | $ -- | $ 21,061 | $ -- | $ 4,387,548
Certain of the Bank’s real estate loans are pledged as collateral for borrowings as set forth in Notes 9 and 11. Certain directors and executive officers of the Company and the Bank are customers of and had transactions with the Bank in the ordinary course of business. Except for the interest rates on loans secured by personal residences, in the opinion of management, all loans included in such transactions were made on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties. Generally, residential first mortgage loans and home equity lines of credit to all employees and directors have been granted at interest rates equal to the Bank’s cost of funds, subject to annual adjustments in the case of residential first mortgage loans and monthly adjustments in the case of home equity lines of credit. At December 31, 2017 and 2016, loans outstanding to these directors and executive officers are summarized as follows:
| 2017 |  | 2016
| (In Thousands) |
Balance, beginning of year | $ 24,793 |  | $ 14,287
New loans | 19,734 |  | 14,299
Payments | (4,486) |  | (3,793)
Balance, end of year | $ 40,041 |  | $ 24,793

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