Note 4. Allowance for Loan Losses and Credit Quality Indicators

Allowance for Loan Losses

The allowance for loan losses is maintained at a level management deems sufficient to absorb probable loan losses inherent in the loan portfolio. The allowance is increased by charges to earnings in the form of provision for loan losses and recoveries of prior loan charge-offs, and decreased by loans charged off. The provision is calculated to bring the allowance to a level which, according to a systematic process of measurement, reflects the amount management estimates is needed to absorb probable losses within the portfolio. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including, among other things, the performance of the Company’s loan portfolio, the economy, changes in interest rates, and the view of the regulatory authorities toward loan classifications. Purchased credit impaired loan pools are evaluated separately from the non-purchased credit impaired portfolio for impairment.

Management performs quarterly assessments to determine the appropriate level of the allowance for loan losses. Differences between actual loan loss experience and estimates are reflected through adjustments that are made by increasing or decreasing the allowance based upon current measurement criteria. Commercial, consumer real estate, and non-real estate consumer loan portfolios are evaluated separately for purposes of determining the allowance. The specific components of the allowance include allocations to individual commercial loans and credit relationships and allocations to the remaining nonhomogeneous and homogeneous pools of loans that have been deemed impaired. Additionally, a loan that becomes adversely classified is removed from a group of loans with similar risk characteristics that are not classified to evaluate the removed loan collectively in a group of adversely classified loans with similar risk characteristics. Management’s general reserve allocations are based on judgment of qualitative and quantitative factors about macro and micro economic conditions reflected within the portfolio of loans and the economy as a whole. Factors considered in this evaluation include, but are not necessarily limited to, probable losses from loan and other credit arrangements, general economic conditions, changes in credit concentrations or pledged collateral, historical loan loss experience, and trends in portfolio volume, maturities, composition, delinquencies, and nonaccruals. Historical loss rates for each risk grade of commercial loans are adjusted by environmental factors to estimate the amount of reserve needed by segment. While management has allocated the allowance for loan losses to various portfolio segments, the entire allowance is available for use against any type of loan loss deemed appropriate by management.

Purchased performing loans are recorded at fair value and include credit and interest rate marks associated with acquisition accounting adjustments, as accounted for under the contractual cash flow method of accounting. The fair value adjustment is accreted as an adjustment to yield over the estimated contractual lives of the loans. There is no allowance for loan losses established at the acquisition date for acquired performing loans. In accordance with GAAP, there was no carryover of previously established allowance for loan losses on acquired portfolios. A provision for loan losses is recorded for any credit deterioration in these acquired loans subsequent to the acquisition. The provision established for covered acquired impaired loans is offset by an adjustment to the FDIC loss share receivable to reflect the indemnified portion of the post-acquisition exposure.

The following tables detail activity within the allowance for loan losses, by portfolio segment, for the dates indicated:


	Three Months Ended September 30,
	2013												2012
				Consumer			Consumer									Consumer			Consumer
	Commercial			Real Estate			and Other			Total			Commercial			Real Estate			and Other			Total
(Amounts in thousands)
Allowance excluding acquired impaired
Beginning balance	$	15,873		$	6,658		$	583		$	23,114		$	18,249		$	7,272		$	642		$	26,163
Provision for loan losses charged to operations		1,551			(807	)		1,366			2,110			436			1,289			191			1,916
Loans charged off		(1,503	)		1,035			(1,487	)		(1,955	)		(1,184	)		(1,126	)		(303	)		(2,613	)
Recoveries credited to allowance		136			30			187			353			198			63			100			361

Net charge-offs		(1,367	)		1,065			(1,300	)		(1,602	)		(986	)		(1,063	)		(203	)		(2,252	)

Ending balance	$	16,057		$	6,916		$	649		$	23,622		$	17,699		$	7,498		$	630		$	25,827

Acquired impaired allowance
Beginning balance	$	8		$	—		$	—		$	8		$	8		$	—		$	—		$	8
Acquired impaired provision		158			877			—			1,035			—			—			—			—
Benefit attributable to FDIC indemnificaton asset		(242	)		(570	)		—			(812	)		—			—			—			—

Provision for loan losses charged to operations		(84	)		307			—			223			—			—			—			—
Provision for loan losses recorded through the FDIC indemnificaton asset		242			570			—			812			—			—			—			—
Loans charged off		—			—			—			—			—			—			—			—
Recoveries credited to allowance		—			—			—			—			—			—			—			—

Net charge-offs		—			—			—			—			—			—			—			—

Ending balance	$	166		$	877		$	—		$	1,043		$	8		$	—		$	—		$	8

Total allowance for loan losses	$	16,223		$	7,793		$	649		$	24,665		$	17,707		$	7,498		$	630		$	25,835


	Nine Months Ended September 30,
	2013												2012
				Consumer			Consumer									Consumer			Consumer
	Commercial			Real Estate			and Other			Total			Commercial			Real Estate			and Other			Total
(Amounts in thousands)
Allowance excluding acquired impaired
Beginning balance	$	17,259		$	7,906		$	597		$	25,762		$	17,551		$	7,711		$	742		$	26,004
Provision for loan losses charged to operations		4,338			422			1,697			6,457			1,928			2,475			248			4,651
Loans charged off		(5,732	)		(1,643	)		(2,345	)		(9,720	)		(2,353	)		(2,802	)		(632	)		(5,787	)
Recoveries credited to allowance		192			231			700			1,123			573			114			272			959

Net charge-offs		(5,540	)		(1,412	)		(1,645	)		(8,597	)		(1,780	)		(2,688	)		(360	)		(4,828	)

Ending balance	$	16,057		$	6,916		$	649		$	23,622		$	17,699		$	7,498		$	630		$	25,827

Acquired impaired allowance
Beginning balance	$	8		$	—		$	—		$	8		$	201		$	—		$	—		$	201
Acquired impaired provision		158			877			—			1,035			(193	)		—			—			(193	)
Benefit attributable to FDIC indemnificaton asset		(242	)		(570	)		—			(812	)		—			—			—			—

Provision for loan losses charged to operations		(84	)		307			—			223			(193	)		—			—			(193	)
Provision for loan losses recorded through the FDIC indemnificaton asset		242			570			—			812			—			—			—			—
Loans charged off		—			—			—			—			—			—			—			—
Recoveries credited to allowance		—			—			—			—			—			—			—			—

Net charge-offs		—			—			—			—			—			—			—			—

Ending balance	$	166		$	877		$	—		$	1,043		$	8		$	—		$	—		$	8

Total allowance for loan losses	$	16,223		$	7,793		$	649		$	24,665		$	17,707		$	7,498		$	630		$	25,835

Credit Quality Indicators

The Company identifies loans for potential impairment through a variety of means including, but not limited to, ongoing loan review, renewal processes, delinquency data, market communications, and public information. If it is determined that it is probable that the Company will not collect all principal and interest amounts contractually due, the loan is generally deemed to be impaired.

The following tables present the Company’s recorded investment in loans considered to be impaired, excluding purchased credit impaired loans, and related information on those loans for the periods indicated:


	September 30, 2013						December 31, 2012
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
(Amounts in thousands)	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans with no related allowance:
Commercial loans
Construction, development, and other land	$	4,229	$	6,376	$	—	$	2,916	$	2,916	$	—
Commercial and industrial		—		—		—		284		284		—
Multi-family residential		—		—		—		—		—		—
Single family non-owner occupied		289		317		—		383		684		—
Non-farm, non-residential		7,408		8,192		—		5,282		5,362		—
Agricultural		—		—		—		—		—		—
Farmland		659		668		—		—		—		—
Consumer real estate loans
Home equity lines		541		546		—		276		277		—
Single family owner occupied		2,448		2,751		—		277		383		—
Owner occupied construction		—		—		—		—		—		—
Consumer and other loans
Consumer loans		—		—		—		—		—		—

Total impaired loans with no allowance		15,574		18,850		—		9,418		9,906		—
Impaired loans with a related allowance:
Commercial loans
Construction, development, and other land		459		459		347		—		—		—
Commercial and industrial		4,743		10,084		3,648		3,318		8,502		3,192
Multi-family residential		—		—		—		378		397		18
Single family non-owner occupied		313		365		38		2,411		2,460		996
Non-farm, non-residential		606		606		7		2,781		2,958		358
Agricultural		—		—		—		—		—		—
Farmland		—		—		—		—		—		—
Consumer real estate loans
Home equity lines		519		535		434		223		230		223
Single family owner occupied		4,930		5,092		782		4,673		4,903		806
Owner occupied construction		—		—		—		—		—		—
Consumer and other loans
Consumer loans		—		—		—		—		—		—

Total impaired loans with an allowance		11,570		17,141		5,256		13,784		19,450		5,593

Total impaired loans	$	27,144	$	35,991	$	5,256	$	23,202	$	29,356	$	5,593


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2013				September 30, 2013
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Amounts in thousands)	Investment		Recognized		Investment		Recognized
Impaired loans with no related allowance:
Commercial loans
Construction, development, and other land	$	6,375	$	40	$	5,133	$	591
Commercial and industrial		—		—		834		16
Multi-family residential		—		—		24		5
Single family non-owner occupied		317		—		1,146		182
Non-farm, non-residential		8,194		—		7,739		630
Agricultural		—		—		—		—
Farmland		667		3		372		18
Consumer real estate loans
Home equity lines		546		—		518		66
Single family owner occupied		2,794		—		2,069		145
Owner occupied construction		—		—		20		5
Consumer and other loans
Consumer loans		—		—		4		—

Total impaired loans with no allowance		18,893		43		17,859		1,658
Impaired loans with a related allowance:
Commercial loans
Construction, development, and other land		463		—		1,409		141
Commercial and industrial		5,328		11		4,009		11
Multi-family residential		—		—		126		7
Single family non-owner occupied		365		—		1,064		8
Non-farm, non-residential		606		—		1,791		52
Agricultural		—		—		—		—
Farmland		—		—		—		—
Consumer real estate loans
Home equity lines		535		9		329		14
Single family owner occupied		5,093		13		4,318		54
Owner occupied construction		—		—		—		—
Consumer and other loans
Consumer loans		—		—		—		—

Total impaired loans with an allowance		12,390		33		13,046		287

Total impaired loans	$	31,283	$	76	$	30,905	$	1,945


	For the Three Months Ended				For the Nine Months Ended
	September 30, 2012				September 30, 2012
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Amounts in thousands)	Investment		Recognized		Investment		Recognized
Impaired loans with no related allowance:
Commercial loans
Construction, development, and other land	$	784	$	—	$	1,296	$	—
Commercial and industrial		449		3		559		13
Multi-family residential		591		—		1,146		4
Single family non-owner occupied		954		4		524		29
Non-farm, non-residential		1,584		41		2,872		65
Agricultural		—		—		—		—
Farmland		372		—		508		—
Consumer real estate loans
Home equity lines		321		—		592		20
Single family owner occupied		4,456		38		5,727		113
Owner occupied construction		—		—		1		—
Consumer and other loans
Consumer loans		—		—		26		—

Total impaired loans with no allowance		9,511		86		13,251		244
Impaired loans with a related allowance:
Commercial loans
Construction, development, and other land		55		—		55		1
Commercial and industrial		3,600		—		3,662		163
Multi-family residential		193		—		1,309		—
Single family non-owner occupied		2,066		—		619		57
Non-farm, non-residential		6,454		90		5,802		291
Agricultural		—		—		—		—
Farmland		372		—		372		—
Consumer real estate loans
Home equity lines		125		—		83		—
Single family owner occupied		3,355		15		4,827		66
Owner occupied construction		—		—		—		—
Consumer and other loans
Consumer loans		—		—		—		—

Total impaired loans with an allowance		16,220		105		16,729		578

Total impaired loans	$	25,731	$	191	$	29,980	$	822

The following tables detail the Company’s recorded investment in loans, excluding purchased credit impaired loans, related to each segment in the allowance for loan losses by portfolio segment and disaggregated on the basis of the Company’s impairment methodology at September 30, 2013, and December 31, 2012.


	September 30, 2013
	Non-acquired		Allowance		Loans		Allowance
	Loans Individually		for Loans		Collectively		for Loans
	Evaluated for		Individually		Evaluated for		Collectively
(Amounts in thousands)	Impairment		Evaluated		Impairment		Evaluated
Commercial loans
Construction, development, and other land	$	4,688	$	347	$	61,896	$	1,476
Commercial and industrial		4,743		3,648		93,951		1,462
Multi-family residential		—		—		57,555		1,008
Single family non-owner occupied		602		38		133,191		3,363
Non-farm, non-residential		8,014		7		461,592		4,399
Agricultural		—		—		2,450		19
Farmland		659		—		32,137		290

Total commercial loans		18,706		4,040		842,772		12,017
Consumer real estate loans
Home equity lines		1,060		434		135,868		1,267
Single family owner occupied		7,378		782		498,208		4,230
Owner occupied construction		—		—		25,813		203

Total consumer real estate loans		8,438		1,216		659,889		5,700
Consumer and other loans
Consumer loans		—		—		71,751		649
Other		—		—		4,708		—

Total consumer and other loans		—		—		76,459		649

Total loans	$	27,144	$	5,256	$	1,579,120	$	18,366


	December 31, 2012
	Non-acquired		Allowance		Loans		Allowance
	Loans Individually		for Loans		Collectively		for Loans
	Evaluated for		Individually		Evaluated for		Collectively
(Amounts in thousands)	Impairment		Evaluated		Impairment		Evaluated
Commercial loans
Construction, development, and other land	$	2,916	$	—	$	55,369	$	1,214
Commercial and industrial		3,602		3,192		88,811		1,159
Multi-family residential		378		18		67,278		1,612
Single family non-owner occupied		2,794		996		134,323		3,371
Non-farm, non-residential		8,063		358		451,240		4,901
Agricultural		—		—		1,852		22
Farmland		—		—		34,779		416

Total commercial loans		17,753		4,564		833,652		12,695
Consumer real estate loans
Home equity lines		499		223		141,684		1,351
Single family owner occupied		4,950		806		483,553		5,189
Owner occupied construction		—		—		16,768		337

Total consumer real estate loans		5,449		1,029		642,005		6,877
Consumer and other loans
Consumer loans		—		—		81,037		597
Other		—		—		5,666		—

Total consumer and other loans		—		—		86,703		597

Total loans	$	23,202	$	5,593	$	1,562,360	$	20,169

The Company aggregates purchased credit impaired loans into the following loan pools: Waccamaw commercial, Waccamaw lines of credit, Peoples commercial, Waccamaw serviced home equity lines, Waccamaw residential, Peoples residential, and Waccamaw consumer. During the quarterly cash flow analysis, four of the Company’s seven purchased credit impaired loan pools were deemed impaired. The pools had a combined recorded investment of $23.45 million, a current unpaid principal balance of $36.30 million, and cumulative impairment of $1.04 million at September 30, 2013. For the three months ended September 30, 2013, the Company had an average recorded investment of $23.54 million and recognized interest income of $721 thousand in connection with impaired loan pools. For the nine months ended September 30, 2013, the Company had an average recorded investment of $15.80 million and recognized interest income of $839 thousand in connection with impaired loan pools.

The following table details the Company’s recorded investment in purchased credit impaired loans and the allowance for loan losses by loan pool at September 30, 2013, and December 31, 2012.


	September 30, 2013				December 31, 2012
	Acquired		Allowance		Acquired		Allowance
	Impaired Loans		for Acquired		Impaired Loans		for Acquired
	Evaluated for		Impaired Loans		Evaluated for		Impaired Loans
(Amounts in thousands)	Impairment		Evaluated		Impairment		Evaluated
Commercial loans
Waccamaw commercial	$	22,299	$	—	$	40,688	$	—
Waccamaw lines of credit		4,077		158		10,009		—
Peoples commercial		9,331		—		23,670		—
Other		2,015		8		2,340		8

Total commercial loans		37,722		166		76,707		8
Consumer real estate loans
Waccamaw serviced home equity lines		44,407		443		50,343		—
Waccamaw residential		5,631		270		8,974		—
Peoples residential		2,630		164		3,237		—

Total consumer real estate loans		52,668		877		62,554		—
Consumer and other loans
Waccamaw consumer		43		—		101		—

Total loans	$	90,433	$	1,043	$	139,362	$	8

As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk rating of commercial loans, the level of classified commercial loans, net charge-offs, nonperforming loans, and general economic conditions. The Company’s loan review function generally reviews all commercial loan relationships greater than $3.0 million on an annual basis and at various times through the year. Smaller commercial and retail loans are sampled for review throughout the year by our internal loan review department. Through the loan review process, loans are identified for upgrade or downgrade in risk rating and changed to reflect current information as part of the process.

The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. A description of the general characteristics of the risk grades is as follows:

•

Pass – This grade includes loans to borrowers of acceptable credit quality and risk. The Company further differentiates within this grade based upon borrower characteristics which include: capital strength, earnings stability, liquidity leverage, and industry.

•

Special Mention – This grade includes loans that require more than a normal degree of supervision and attention. These loans have all the characteristics of an adequate asset, but due to being adversely affected by economic or financial conditions have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan.

•

Substandard – This grade includes loans that have well defined weaknesses which make payment default or principal exposure possible, but not yet certain. Such loans are apt to be dependent upon collateral liquidation, a secondary source of repayment, or an event outside of the normal course of business to meet the repayment terms.

•

Doubtful – This grade includes loans that are placed on nonaccrual status. These loans have all the weaknesses inherent in a substandard loan with the added factor that the weaknesses are so severe that collection or liquidation in full, on the basis of current existing facts, conditions and values, is extremely unlikely, but because of certain specific pending factors, the amount of loss cannot yet be determined.

•

Loss – This grade includes loans that are to be charged off or charged down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. “Loss” is not intended to imply that the asset has no recovery or salvage value, but simply that it is not practical or desirable to defer writing off all or some portion of the loan, even though partial recovery may be realized in the future.

The following tables present the Company’s investment in loans held for investment by internal credit grade indicator at September 30, 2013, and December 31, 2012. Purchased credit impaired loan pools have been disaggregated in the following tables for disclosure purposes. Non-covered special mention and substandard loans declined between December 31, 2012, and September 30, 2013, due primarily to loan work-out activity across the portfolio coupled with continued credit improvement in the Peoples’ acquired loan portfolio.


	September 30, 2013
			Special
(Amounts in thousands)	Pass		Mention		Substandard		Doubtful		Loss		Total
Non-covered loans
Commercial loans
Construction, development, and other land	$	46,431	$	1,371	$	7,007	$	982	$	—	$	55,791
Commercial and industrial		87,129		1,338		3,550		3,955		—		95,972
Multi-family residential		53,093		2,262		724		—		—		56,079
Single family non-owner occupied		118,079		4,455		9,579		140		—		132,253
Non-farm, non-residential		417,892		15,729		21,253		373		—		455,247
Agricultural		2,252		11		11		—		—		2,274
Farmland		26,974		1,695		3,216		—		—		31,885
Consumer real estate loans
Home equity lines		104,582		1,384		3,125		520		—		109,611
Single family owner occupied		455,194		8,018		29,212		—		—		492,424
Owner occupied construction		25,349		—		—		—		—		25,349
Consumer and other loans
Consumer loans		70,313		898		465		3		—		71,679
Other		4,696		2		10		—		—		4,708

Total non-covered loans	$	1,411,984	$	37,163	$	78,152	$	5,973	$	—	$	1,533,272


	September 30, 2013
			Special
(Amounts in thousands)	Pass		Mention		Substandard		Doubtful		Loss		Total
Covered loans
Commercial loans
Construction, development, and other land	$	10,183	$	1,292	$	6,423	$	81	$	—	$	17,979
Commercial and industrial		3,299		400		218		34		—		3,951
Multi-family residential		1,476		—		527		—		—		2,003
Single family non-owner occupied		4,471		1,645		2,007		19		—		8,142
Non-farm, non-residential		15,536		4,835		17,340		40		—		37,751
Agricultural		176		—		—		—		—		176
Farmland		676		—		338		—		—		1,014
Consumer real estate loans
Home equity lines		15,378		10,690		45,632		24		—		71,724
Single family owner occupied		12,489		82		6,560		122		—		19,253
Owner occupied construction		203		19		1,084		—		—		1,306
Consumer and other loans
Consumer loans		126		—		—		—		—		126
Other		—		—		—		—		—		—

Total covered loans	$	64,013	$	18,963	$	80,129	$	320	$	—	$	163,425


	December 31, 2012
			Special
(Amounts in thousands)	Pass		Mention		Substandard		Doubtful		Loss		Total
Non-covered loans
Commercial loans
Construction, development, and other land	$	41,850	$	1,497	$	13,546	$	541	$	—	$	57,434
Commercial and industrial		77,573		2,506		4,821		3,838		—		88,738
Multi-family residential		60,161		4,043		1,490		—		—		65,694
Single family non-owner occupied		112,562		5,938		16,092		1,320		—		135,912
Non-farm, non-residential		399,907		15,975		32,808		120		—		448,810
Agricultural		1,657		19		33		—		—		1,709
Farmland		28,887		2,262		3,421		—		—		34,570
Consumer real estate loans
Home equity lines		104,750		2,739		3,592		—		—		111,081
Single family owner occupied		436,587		9,599		27,319		—		42		473,547
Owner occupied construction		15,841		382		—		—		—		16,223
Consumer and other loans
Consumer loans		76,787		867		501		8		—		78,163
Other		5,657		8		1		—		—		5,666

Total non-covered loans	$	1,362,219	$	45,835	$	103,624	$	5,827	$	42	$	1,517,547


	December 31, 2012
			Special
(Amounts in thousands)	Pass		Mention		Substandard		Doubtful		Loss		Total
Covered loans
Commercial loans
Construction, development, and other land	$	6,463	$	2,120	$	17,834	$	178	$	—	$	26,595
Commercial and industrial		6,225		445		197		81		—		6,948
Multi-family residential		1,962		—		649		—		—		2,611
Single family non-owner occupied		6,065		2,223		3,015		125		—		11,428
Non-farm, non-residential		23,855		5,477		19,189		44		—		48,565
Agricultural		143		—		1		—		—		144
Farmland		935		—		156		—		—		1,091
Consumer real estate loans
Home equity lines		16,323		11,981		53,116		25		—		81,445
Single family owner occupied		16,011		927		5,786		237		—		22,961
Owner occupied construction		484		—		1,160		—		—		1,644
Consumer and other loans
Consumer loans		2,987		562		125		—		—		3,674
Other		—		—		—		—		—		—

Total covered loans	$	81,453	$	23,735	$	101,228	$	690	$	—	$	207,106

Nonaccrual loans, presented by loan class, consisted of the following at September 30, 2013, and December 31, 2012. Loans acquired with credit deterioration through business combinations, for which a discount exists, are generally not considered to be nonaccrual as a result of the accretion of the discount which is based on the expected cash flows of the loans.


	September 30, 2013						December 31, 2012
(Amounts in thousands)	Non-covered		Covered		Total		Non-covered		Covered		Total
Commercial loans
Construction, development, and other land	$	5,065	$	619	$	5,684	$	405	$	1,990	$	2,395
Commercial and industrial		5,058		103		5,161		3,912		35		3,947
Multi-family residential		—		—		—		378		—		378
Single family non-owner occupied		2,216		119		2,335		7,071		21		7,092
Non-farm, non-residential		5,268		318		5,586		5,938		951		6,889
Agricultural		—		—		—		2		—		2
Farmland		437		304		741		—		—		—
Consumer real estate loans
Home equity lines		1,417		276		1,693		872		436		1,308
Single family owner occupied		6,706		1,599		8,305		5,219		831		6,050
Owner occupied construction		—		241		241		—		59		59
Consumer and other loans
Consumer loans		222		—		222		126		—		126
Other		—		—		—		—		—		—

Total		26,389		3,579		29,968		23,923		4,323		28,246
Acquired impaired loans		8		—		8		8		—		8

Total nonaccrual loans	$	26,397	$	3,579	$	29,976	$	23,931	$	4,323	$	28,254

The following tables present the aging of past due loans, by loan class, at September 30, 2013, and December 31, 2012. Nonaccrual loans, excluding those 0 to 29 days past due, are included in the applicable delinquency category. There were no non-covered accruing loans contractually past due 90 days or more at September 30, 2013, and December 31, 2012. There were no covered accruing loans contractually past due 90 days or more at December 31, 2012, and $82 thousand at September 30, 2013. Acquired loans that are past due continue to accrue interest through the accretable yield under the accretion method of accounting and therefore are not considered to be nonaccrual. Purchased credit impaired loan pools have been disaggregated in the following tables for disclosure purposes.


	September 30, 2013
	30 - 59 Days		60 - 89 Days		90+ Days		Total		Current		Total
(Amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Loans		Loans
Non-covered loans
Commercial loans
Construction, development, and other land	$	130	$	156	$	4,929	$	5,215	$	50,576	$	55,791
Commercial and industrial		438		142		1,221		1,801		94,171		95,972
Multi-family residential		100		—		—		100		55,979		56,079
Single family non-owner occupied		959		268		1,129		2,356		129,897		132,253
Non-farm, non-residential		1,524		231		4,332		6,087		449,160		455,247
Agricultural		—		—		—		—		2,274		2,274
Farmland		—		—		437		437		31,448		31,885
Consumer real estate loans
Home equity lines		433		101		847		1,381		108,230		109,611
Single family owner occupied		3,512		713		1,998		6,223		486,201		492,424
Owner occupied construction		79		—		—		79		25,270		25,349
Consumer and other loans
Consumer loans		472		89		158		719		70,960		71,679
Other		—		—		—		—		4,708		4,708

Total non-covered loans	$	7,647	$	1,700	$	15,051	$	24,398	$	1,508,874	$	1,533,272


	September 30, 2013
	30 - 59 Days		60 - 89 Days		90+ Days		Total		Current		Total
(Amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Loans		Loans
Covered loans
Commercial loans
Construction, development, and other land	$	34	$	59	$	159	$	252	$	17,727	$	17,979
Commercial and industrial		30		58		37		125		3,826		3,951
Multi-family residential		—		—		—		—		2,003		2,003
Single family non-owner occupied		72		—		119		191		7,951		8,142
Non-farm, non-residential		144		—		267		411		37,340		37,751
Agricultural		—		—		—		—		176		176
Farmland		—		—		304		304		710		1,014
Consumer real estate loans
Home equity lines		400		10		165		575		71,149		71,724
Single family owner occupied		390		—		1,352		1,742		17,511		19,253
Owner occupied construction		121		19		120		260		1,046		1,306
Consumer and other loans
Consumer loans		—		—		—		—		126		126
Other		—		—		—		—		—		—

Total covered loans	$	1,191	$	146	$	2,523	$	3,860	$	159,565	$	163,425


	December 31, 2012
	30 - 59 Days		60 - 89 Days		90+ Days		Total		Current		Total
(Amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Loans		Loans
Non-covered loans
Commercial loans
Construction, development, and other land	$	344	$	—	$	188	$	532	$	56,902	$	57,434
Commercial and industrial		387		84		1,432		1,903		86,835		88,738
Multi-family residential		624		—		—		624		65,070		65,694
Single family non-owner occupied		1,841		1,348		3,715		6,904		129,008		135,912
Non-farm, non-residential		2,702		936		3,621		7,259		441,551		448,810
Agricultural		—		—		—		—		1,709		1,709
Farmland		216		196		—		412		34,158		34,570
Consumer real estate loans
Home equity lines		315		93		495		903		110,178		111,081
Single family owner occupied		6,564		1,176		1,644		9,384		464,163		473,547
Owner occupied construction		382		—		—		382		15,841		16,223
Consumer and other loans
Consumer loans		715		73		47		835		77,328		78,163
Other		—		—		—		—		5,666		5,666

Total non-covered loans	$	14,090	$	3,906	$	11,142	$	29,138	$	1,488,409	$	1,517,547


	December 31, 2012
	30 - 59 Days		60 - 89 Days		90+ Days		Total		Current		Total
(Amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Loans		Loans
Covered loans
Commercial loans
Construction, development, and other land	$	252	$	161	$	1,121	$	1,534	$	25,061	$	26,595
Commercial and industrial		45		—		—		45		6,903		6,948
Multi-family residential		—		—		—		—		2,611		2,611
Single family non-owner occupied		8		—		21		29		11,399		11,428
Non-farm, non-residential		501		—		927		1,428		47,137		48,565
Agricultural		—		—		—		—		144		144
Farmland		6		—		—		6		1,085		1,091
Consumer real estate loans
Home equity lines		217		112		204		533		80,912		81,445
Single family owner occupied		413		135		475		1,023		21,938		22,961
Owner occupied construction		—		—		59		59		1,585		1,644
Consumer and other loans
Consumer loans		—		—		—		—		3,674		3,674
Other		—		—		—		—		—		—

Total covered loans	$	1,442	$	408	$	2,807	$	4,657	$	202,449	$	207,106

The Company’s troubled debt restructurings (“TDRs”) totaled $11.92 million at September 30, 2013, and $12.05 million at December 31, 2012, which are reported net of those on nonaccrual status of $2.66 million and $3.83 million, respectively. Accruing nonperforming TDRs amounted to $2.23 million, or 18.69% of total accruing TDRs at September 30, 2013, and $6.01 million, or 49.88% of total TDRs at December 31, 2012. The allowance for loan losses included reserves related to TDRs of $1.69 million and $1.87 million at September 30, 2013, and December 31, 2012, respectively. Interest income recognized on TDRs for the three and nine months ended September 30, 2013, totaled $183 thousand and $422 thousand, respectively. Interest income recognized on TDRs for the three and nine months ended September 30, 2012, totaled $62 thousand and $237 thousand, respectively. There were no covered loans recorded as TDRs at September 30, 2013. A loan acquired with credit deterioration through a business combination, for which a discount exists, is generally not considered a TDR as long as the loan remains in the loan pool.

When restructuring loans for borrowers experiencing financial difficulty, the Company may make concessions in interest rates, loan terms and/or amortization terms. All restructured loans to borrowers experiencing financial difficulty in excess of $250 thousand are evaluated for a specific reserve based on either the collateral or net present value method, whichever is most applicable. Restructured loans under $250 thousand are subject to the reserve calculation at the historical loss rate for classified loans. Certain TDRs are classified as nonperforming at the time of restructuring and are returned to performing status after six months of satisfactory payment performance; however, these loans remain identified as impaired until full payment or other satisfaction of the obligation occurs.

The following tables detail loans modified as TDRs that were restructured during the three and nine months ended September 30, 2013 and 2012 by type of concession made and loan class. The post-modification recorded investment represents the loan balance immediately following modification.


	Three Months Ended September 30,
	2013						2012
	Total		Pre-Modification		Post-Modification		Total		Pre-Modification		Post-Modification
(Amounts in thousands)	Contracts		Recorded Investment		Recorded Investment		Contracts		Recorded Investment		Recorded Investment
Below market interest rate
Single family owner occupied		1	$	359	$	326		—	$	—	$	—
Below market interest rate and extended payment term
Single family owner occupied		2		642		600		—		—		—

Total		3	$	1,001	$	926		—	$	—	$	—


	Nine Months Ended September 30,
	2013						2012
	Total		Pre-Modification		Post-Modification		Total		Pre-Modification		Post-Modification
(Amounts in thousands)	Contracts		Recorded Investment		Recorded Investment		Contracts		Recorded Investment		Recorded Investment
Below market interest rate
Single family owner occupied		1	$	359	$	326		—	$	—	$	—
Extended payment term
Single family owner occupied		—		—		—		1	$	351	$	319
Below market interest rate and extended payment term
Single family owner occupied		2		642		600		—		—		—

Total		3	$	1,001	$	926		1	$	351	$	319

The following tables detail loans modified as TDRs that were restructured within the previous 12 months for which there was a payment default during the three and nine months ended September 30, 2013 and 2012 by loan class.


	Three Months Ended September 30,
	2013				2012
	Total		Recorded		Total		Recorded
	Contracts		Investment		Contracts		Investment
(Amounts in thousands)
Non-farm, non-residential		1	$	978		—	$	—

Total		1	$	978		—	$	—


	Nine Months Ended September 30,
	2013				2012
	Total		Recorded		Total		Recorded
	Contracts		Investment		Contracts		Investment
(Amounts in thousands)
Non-farm, non-residential		1	$	978		—	$	—

Total		1	$	978		—	$	—