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NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES | 6 Months Ended
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Jun. 30, 2018
Notes |
NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES | NOTE 6: LOANS AND ALLOWANCE FOR LOAN LOSSES Classes of loans at June 30, 2018 and December 31, 2017 were as follows:
| June 30, |  | December 31,
| 2018 |  | 2017
| (In Thousands)
One- to four-family residential construction | $ 31,770 |  | $ 20,793
Subdivision construction | 15,913 |  | 18,062
Land development | 46,643 |  | 43,971
Commercial construction | 1,258,564 |  | 1,068,352
Owner occupied one- to four-family residential | 228,211 |  | 190,515
Non-owner occupied one- to four-family residential | 112,416 |  | 119,468
Commercial real estate | 1,307,966 |  | 1,235,329
Other residential | 785,202 |  | 745,645
Commercial business | 347,312 |  | 353,351
Industrial revenue bonds | 20,021 |  | 21,859
Consumer auto | 298,977 |  | 357,142
Consumer other | 60,052 |  | 63,368
Home equity lines of credit | 114,742 |  | 115,439
Loans acquired and accounted for under ASC 310-30, net of discounts | 184,136 |  | 209,669
| 4,811,925 |  | 4,562,963
Undisbursed portion of loans in process | (907,906) |  | (793,669)
Allowance for loan losses | (37,556) |  | (36,492)
Deferred loan fees and gains, net | (6,662) |  | (6,500)
| $ 3,859,801 |  | $ 3,726,302
Weighted average interest rate | 4.96% |  | 4.74%
Classes of loans by aging were as follows:
| June 30, 2018
|  |  |  |  |  |  | Total Loans
|  |  |  |  |  | Total | > 90 Days
| 30-59 Days | 60-89 Days | Over | Total |  | Loans | Past Due and
| Past Due | Past Due | 90 Days | Past Due | Current | Receivable | Still Accruing
| (In Thousands)
One- to four-family |  |  |  |  |  |  |
residential construction | $ — | $ — | $ — | $ — | $ 31,770 | $ 31,770 | $ —
Subdivision construction | — | — | 91 | 91 | 15,822 | 15,913 | —
Land development | 594 | — | — | 594 | 46,049 | 46,643 | —
Commercial construction | — | — | — | — | 1,258,564 | 1,258,564 | —
Owner occupied one- to |  |  |  |  |  |  |
four-family residential | 100 | 267 | 848 | 1,215 | 226,996 | 228,211 | —
Non-owner occupied one- |  |  |  |  |  |  |
o to four-family residential | 359 | 479 | 1,743 | 2,581 | 109,835 | 112,416 | —
Commercial real estate | 6,267 | 412 | 352 | 7,031 | 1,300,935 | 1,307,966 | —
Other residential | — | — | — | — | 785,202 | 785,202 | —
Commercial business | 40 | 201 | 2,852 | 3,093 | 344,219 | 347,312 | —
Industrial revenue bonds | — | — | — | — | 20,021 | 20,021 | —
Consumer auto | 2,876 | 437 | 1,482 | 4,795 | 294,182 | 298,977 | —
Consumer other | 570 | 62 | 441 | 1,073 | 58,979 | 60,052 | —
Home equity lines of credit | 154 | 166 | 316 | 636 | 114,106 | 114,742 | —
Loans acquired and |  |  |  |  |  |  |
accounted for under |  |  |  |  |  |  |
ASC 310-30, net of |  |  |  |  |  |  |
discounts | 868 | 1,067 | 6,876 | 8,811 | 175,325 | 184,136 | —
| 11,828 | 3,091 | 15,001 | 29,920 | 4,782,005 | 4,811,925 | —
Less loans acquired and accounted for under |  |  |  |  |  |  |
ASC 310-30, net | 868 | 1,067 | 6,876 | 8,811 | 175,325 | 184,136 | —
Total | $ 10,960 | $ 2,024 | $ 8,125 | $ 21,109 | $ 4,606,680 | $ 4,627,789 | $ —
| December 31, 2017
|  |  |  |  |  |  | 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 | $ 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
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC 310-30, net of |  |  |  |  |  |  |
discounts | 4,449 | 1,951 | 10,675 | 17,075 | 192,594 | 209,669 | 272
| 24,854 | 6,171 | 21,930 | 52,955 | 4,510,008 | 4,562,963 | 368
Less loans acquired and accounted for under ASC 310-30, net | 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
Nonaccruing loans (excluding FDIC-assisted acquired loans, net of discount) are summarized as follows:
| June 30, |  | December 31,
| 2018 |  | 2017
| (In Thousands)
One- to four-family residential construction | $ — |  | $ —
Subdivision construction | 91 |  | 98
Land development | — |  | —
Commercial construction | — |  | —
Owner occupied one- to four-family residential | 848 |  | 904
Non-owner occupied one- to four-family residential | 1,743 |  | 1,758
Commercial real estate | 352 |  | 1,226
Other residential | — |  | 1,877
Commercial business | 2,852 |  | 2,063
Industrial revenue bonds | — |  | —
Consumer auto | 1,482 |  | 2,272
Consumer other | 441 |  | 557
Home equity lines of credit | 316 |  | 404
Total | $ 8,125 |  | $ 11,159
The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2018. 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 June 30, 2018:
| 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 April 1, 2018 | $ 2,602 | $ 3,212 | $ 18,062 | $ 2,188 | $ 3,695 | $ 6,551 | $ 36,310
Provision (benefit) charged to expense | 63 | 364 | 1,297 | 109 | (454) | 571 | 1,950
Losses charged off | (27) | (75) | — | (46) | (472) | (2,112) | (2,732)
Recoveries | 89 | 344 | 115 | 144 | 222 | 1,114 | 2,028
Balance June 30, 2018 | $ 2,727 | $ 3,845 | $ 19,474 | $ 2,395 | $ 2,991 | $ 6,124 | $ 37,556
Balance January 1, 2018 | $ 2,108 | $ 2,839 | $ 18,639 | $ 1,767 | $ 3,581 | $ 7,558 | $ 36,492
Provision (benefit) charged to expense | 487 | 969 | 811 | 471 | 28 | 1,134 | 3,900
Losses charged off | (41) | (331) | (102) | (83) | (881) | (4,934) | (6,372)
Recoveries | 173 | 368 | 126 | 240 | 263 | 2,366 | 3,536
Balance June 30, 2018 | $ 2,727 | $ 3,845 | $ 19,474 | $ 2,395 | $ 2,991 | $ 6,124 | $ 37,556
Ending balance: |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |
impairment | $ 737 | $ — | $ 220 | $ — | $ 1,422 | $ 641 | $ 3,020
Collectively evaluated for |  |  |  |  |  |  |
impairment | $ 1,953 | $ 3,817 | $ 18,988 | $ 2,322 | $ 1,545 | $ 5,443 | $ 34,068
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC |  |  |  |  |  |  |
310-30 | $ 37 | $ 28 | $ 266 | $ 73 | $ 24 | $ 40 | $ 468
Loans |  |  |  |  |  |  |
Individually evaluated for |  |  |  |  |  |  |
impairment | $ 6,740 | $ 1,015 | $ 8,313 | $ 15 | $ 3,350 | $ 3,330 | $ 22,763
Collectively evaluated for |  |  |  |  |  |  |
impairment | $ 381,570 | $ 784,187 | $ 1,299,653 | $ 1,305,192 | $ 363,983 | $ 470,441 | $ 4,605,026
Loans acquired and |  |  |  |  |  |  |
accounted for under ASC |  |  |  |  |  |  |
310-30 | $ 103,903 | $ 13,193 | $ 36,857 | $ 3,404 | $ 4,444 | $ 22,335 | $ 184,136
The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 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 April 1, 2017 | $ 2,857 | $ 3,790 | $ 15,487 | $ 2,497 | $ 4,671 | $ 7,691 | $ 36,993
Provision (benefit) charged to expense | (427) | (147) | 1,246 | (724) | (661) | 2,663 | 1,950
Losses charged off | (41) | (2) | (1,291) | (92) | — | (2,565) | (3,991)
Recoveries | 24 | 14 | — | 30 | 355 | 1,158 | 1,581
Balance June 30, 2017 | $ 2,413 | $ 3,655 | $ 15,442 | $ 1,711 | $ 4,365 | $ 8,947 | $ 36,533
Balance January 1, 2017 | $ 2,322 | $ 5,486 | $ 15,938 | $ 2,284 | $ 3,015 | $ 8,355 | $ 37,400
Provision (benefit) charged to expense | 122 | (1,898) | 770 | (223) | 1,224 | 4,205 | 4,200
Losses charged off | (76) | (2) | (1,292) | (387) | (275) | (5,968) | (8,000)
Recoveries | 45 | 69 | 26 | 37 | 401 | 2,355 | 2,933
Balance June 30, 2017 | $ 2,413 | $ 3,655 | $ 15,442 | $ 1,711 | $ 4,365 | $ 8,947 | $ 36,533
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, 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 |  |  |  |  |  |  |
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
The portfolio segments used in the preceding three tables correspond to the loan classes used in all other tables in Note 6 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-assisted loans, net of discount), are summarized as follows:
| June 30, 2018
|  | Unpaid |
| Recorded | Principal | Specific
| Balance | Balance | Allowance
One- to four-family residential construction | $ — | $ — | $ —
Subdivision construction | 335 | 357 | 110
Land development | 15 | 18 | —
Commercial construction | — | — | —
Owner occupied one- to four- family residential | 3,261 | 3,579 | 284
Non-owner occupied one- to four- family residential | 3,144 | 3,465 | 343
Commercial real estate | 8,313 | 8,468 | 220
Other residential | 1,015 | 1,015 | —
Commercial business | 3,350 | 4,754 | 1,422
Industrial revenue bonds | — | — | —
Consumer auto | 2,033 | 2,228 | 369
Consumer other | 784 | 1,007 | 118
Home equity lines of credit | 513 | 553 | 154
Total | $ 22,763 | $ 25,444 | $ 3,020
| Three Months Ended |  | Six Months Ended
| June 30, 2018 |  | June 30, 2018
| Average |  |  | Average |
| Investment | Interest |  | Investment | Interest
| in Impaired | Income |  | in Impaired | Income
| Loans | Recognized |  | Loans | Recognized
| (In Thousands)
One- to four-family residential construction | $ — | $ — |  | $ — | $ —
Subdivision construction | 338 | 2 |  | 354 | 8
Land development | 15 | — |  | 15 | —
Commercial construction | — | — |  | — | —
Owner occupied one- to four-family residential | 3,272 | 44 |  | 3,283 | 89
Non-owner occupied one- to four-family residential | 3,225 | 38 |  | 3,331 | 92
Commercial real estate | 7,391 | 145 |  | 7,328 | 223
Other residential | 1,017 | 10 |  | 1,714 | 20
Commercial business | 3,559 | 258 |  | 3,625 | 289
Industrial revenue bonds | — | — |  | — | —
Consumer auto | 2,034 | 40 |  | 2,247 | 81
Consumer other | 879 | 18 |  | 874 | 37
Home equity lines of credit | 528 | 9 |  | 548 | 28
Total | $ 22,258 | $ 564 |  | $ 23,319 | $ 867
| At or for the Year Ended 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
| June 30, 2017
|  | Unpaid |  |
| Recorded | Principal | Specific |
| Balance | Balance | Allowance |
| (In Thousands)
One- to four-family residential construction | $ 380 | $ 380 | $ — |
Subdivision construction | 498 | 512 | 120 |
Land development | 457 | 545 | — |
Commercial construction | — | — | — |
Owner occupied one- to four-family residential | 3,475 | 3,766 | 357 |
Non-owner occupied one- to four-family residential | 2,189 | 2,446 | 88 |
Commercial real estate | 5,945 | 6,303 | 67 |
Other residential | 3,582 | 3,600 | — |
Commercial business | 6,973 | 7,827 | 3,189 |
Industrial revenue bonds | — | — | — |
Consumer auto | 2,272 | 2,462 | 412 |
Consumer other | 885 | 998 | 133 |
Home equity lines of credit | 359 | 431 | 58 |
Total | $ 27,015 | $ 29,270 | $ 4,424 |
| Three Months Ended |  | Six Months Ended
| June 30, 2017 |  | June 30, 2017
| Average |  |  | Average |
| Investment | Interest |  | Investment | Interest
| in Impaired | Income |  | in Impaired | Income
| Loans | Recognized |  | Loans | Recognized
| (In Thousands)
One- to four-family residential construction | $ 382 | $ — |  | $ 386 | $ —
Subdivision construction | 701 | 5 |  | 756 | 12
Land development | 3,069 | 5 |  | 3,267 | 21
Commercial construction | — | — |  | — | —
Owner occupied one- to four-family residential | 3,302 | 43 |  | 3,356 | 80
Non-owner occupied one- to four-family residential | 2,066 | 26 |  | 1,999 | 48
Commercial real estate | 9,056 | 101 |  | 10,193 | 159
Other residential | 3,719 | 37 |  | 3,761 | 75
Commercial business | 6,979 | 40 |  | 6,432 | 126
Industrial revenue bonds | — | — |  | — | —
Consumer auto | 2,029 | 48 |  | 2,211 | 77
Consumer other | 857 | 24 |  | 827 | 39
Home equity lines of credit | 339 | 8 |  | 367 | 18
Total | $ 32,499 | $ 337 |  | $ 33,555 | $ 655
At June 30, 2018, $9.7 million of impaired loans had specific valuation allowances totaling $3.0 million. At December 31, 2017, $12.7 million of impaired loans had specific valuation allowances totaling $4.0 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 flow or collateral adequacy approach. The following tables present newly restructured loans during the three and six months ended June 30, 2018 and 2017, respectively, by type of modification:
| Three Months Ended June 30, 2018
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Consumer | $ — | $ 287 | $ — | $ 287
| Three Months Ended June 30, 2017
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Consumer | $ — | $ 5 | $ — | $ 5
| Six Months Ended June 30, 2018
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Mortgage loans on real estate: |  |  |  |
One- to four-family residential | $ 1,348 | $ — | $ — | $ 1,348
Consumer | — | 439 | — | 439
| $ 1,348 | $ 439 | $ — | $ 1,787
| Six Months Ended June 30, 2017
|  |  |  | Total
| Interest Only | Term | Combination | Modification
| (In Thousands)
Commercial business | $ — | $ — | $ 274 | $ 274
Consumer | — | 5 | — | 5
| $ — | $ 5 | $ 274 | $ 279
At June 30, 2018, the Company had $13.4 million of loans that were modified in troubled debt restructurings and impaired, as follows: $259,000 of construction and land development loans, $5.5 million of single family and multi-family residential mortgage loans, $6.0 million of commercial real estate loans, $836,000 of commercial business loans and $886,000 of consumer loans. Of the total troubled debt restructurings at June 30, 2018, $11.1 million were accruing interest and $7.5 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 six months ended June 30, 2018. When loans modified as troubled debt restructurings 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, 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 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. During the three and six months ended June 30, 2018, $16,000 and $39,000 of loans, respectively, all of which consisted of one- to four-family residential loans, designated as troubled debt restructurings met the criteria for placement back on accrual status. The criteria is generally a minimum of six months of consistent and timely payment performance under original or modified terms. During the three and six months ended June 30, 2017, $111,000 and $345,000 of loans, respectively, all of which consisted of one- to four- family residential loans, designated as troubled debt restructurings met the criteria for placement back on accrual status. 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 also evaluated using this internal grading system and are accounted for in pools. Minimal adverse classification in these acquired loan pools was identified as of June 30, 2018 and December 31, 2017, respectively. See Note 7 for further discussion of the acquired loan pools and the 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. In early 2018, we expanded our loan risk rating system to allow for further segregation of satisfactory credits. No significant changes were made to the allowance for loan loss methodology during the past year. The loan grading system is presented by loan class below:
| June 30, 2018
|  |  | Special |  |  |
| Satisfactory | Watch | Mention | Substandard | Doubtful | Total
| (In Thousands)
One- to four-family residential |  |  |  |  |  |
construction | $ 31,139 | $ 631 | $ — | $ — | $ — | $ 31,770
Subdivision construction | 13,749 | 2,073 | — | 91 | — | 15,913
Land development | 41,943 | 4,700 | — | — | — | 46,643
Commercial construction | 1,258,564 | — | — | — | — | 1,258,564
Owner occupied one- to four- |  |  |  |  |  |
family residential | 226,388 | — | — | 1,823 | — | 228,211
Non-owner occupied one- to |  |  |  |  |  |
four- family residential | 109,007 | 1,423 | — | 1,986 | — | 112,416
Commercial real estate | 1,297,215 | 3,726 | — | 7,025 | — | 1,307,966
Other residential | 783,381 | 1,821 | — | — | — | 785,202
Commercial business | 339,344 | 5,048 | — | 2,920 | — | 347,312
Industrial revenue bonds | 20,021 | — | — | — | — | 20,021
Consumer auto | 297,174 | — | — | 1,803 | — | 298,977
Consumer other | 59,390 | 12 | — | 650 | — | 60,052
Home equity lines of credit | 114,240 | — | — | 502 | — | 114,742
Loans acquired and accounted |  |  |  |  |  |
for under ASC 310-30, |  |  |  |  |  |
net of discounts | 184,105 | — | — | 31 | — | 184,136
Total | $ 4,775,660 | $ 19,434 | $ — | $ 16,831 | $ — | $ 4,811,925
| 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
Loans acquired and accounted |  |  |  |  |  |
for under ASC 310-30, |  |  |  |  |  |
net of discounts | 209,657 | — | — | 12 | — | 209,669
Total | $ 4,518,002 | $ 25,816 | $ — | $ 18,645 | $ 500 | $ 4,562,963

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