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Note 4 - Loans

9 Months Ended

Sep. 30, 2020

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4. Loans

The Company groups loans held for investment into three segments (commercial loans, consumer real estate loans, and consumer and other loans) with each segment divided into various classes. Covered loans are those loans acquired in Federal Deposit Insurance Corporation (“FDIC”) assisted transactions that are covered by loss share agreements. Customer overdrafts reclassified as loans totaled $1.67 million as of September 30, 2020, and $2.20 million as of December 31, 2019. Deferred loan fees, net of loan costs, totaled $7.47 million as of September 30, 2020, and $4.60 million as of December 31, 2019. For information about off-balance sheet financing, see Note 15, “Litigation, Commitments, and Contingencies,” to the Condensed Consolidated Financial Statements of this report.

The following table presents loans, net of unearned income, within the non-covered portfolio by loan class, as of the dates indicated:

	*September 30, 2020*					*December 31, 2019*
(Amounts in thousands)	*Amount*		*Percent*			*Amount*		*Percent*
Non-covered loans held for investment
Commercial loans
Construction, development, and other land	$	46,785		2.13	%	$	48,659		2.30	%
Commercial and industrial		179,714		8.19	%		142,962		6.76	%
Multi-family residential		105,647		4.81	%		121,840		5.76	%
Single family non-owner occupied		189,265		8.62	%		163,181		7.72	%
Non-farm, non-residential		748,815		34.11	%		727,261		34.39	%
Agricultural		10,362		0.47	%		11,756		0.56	%
Farmland		22,973		1.05	%		23,155		1.10	%
Total commercial loans		1,303,561		59.38	%		1,238,814		58.59	%
Consumer real estate loans
Home equity lines		94,056		4.29	%		110,078		5.21	%
Single family owner occupied		644,598		29.37	%		620,697		29.35	%
Owner occupied construction		17,460		0.79	%		17,241		0.82	%
Total consumer real estate loans		756,114		34.45	%		748,016		35.38	%
Consumer and other loans
Consumer loans		118,738		5.41	%		110,027		5.20	%
Other		5,838		0.27	%		4,742		0.22	%
Total consumer and other loans		124,576		5.68	%		114,769		5.42	%
Total non-covered loans		2,184,251		99.51	%		2,101,599		99.39	%
Total covered loans		10,744		0.49	%		12,861		0.61	%
Total loans held for investment, net of unearned income	$	2,194,995		100.00	%	$	2,114,460		100.00	%

Loans held for sale	$	-				$	263

Commercial and industrial loan balances grew significantly compared to December 31, 2019. The Company began participating as a Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) lender during the second quarter of 2020. At September 30, 2020, the PPP loans had a current balance of $61.00 million, and were included in commercial and industrial loan balances. Deferred loan origination fees related to the PPP loans, net of deferred loan origination costs, which totaled $2.30 million at September 30, 2020, were also recorded. During the third quarter of 2020, the Company recorded amortization of net deferred loan origination fees of $287 thousand on PPP loans and $479 thousand in amortization for the nine month period. The remaining net deferred loan origination fees will be amortized over the expected life of the respective loans, or until forgiven by the SBA, and will be recognized in net interest income.

The following table presents the covered loan portfolio, by loan class, as of the dates indicated:

	*September 30, 2020*		*December 31, 2019*
(Amounts in thousands)
Covered loans
Commercial loans
Construction, development, and other land	$	27	$	28
Single family non-owner occupied		188		199
Non-farm, non-residential		-		3
Total commercial loans		215		230
Consumer real estate loans
Home equity lines		8,079		9,853
Single family owner occupied		2,450		2,778
Total consumer real estate loans		10,529		12,631
Total covered loans	$	10,744	$	12,861

The Company identifies certain purchased loans as impaired when fair values are established at acquisition and groups those purchased credit impaired (“PCI”) loans into loan pools with common risk characteristics. The Company estimates cash flows to be collected on PCI loans and discounts those cash flows at a market rate of interest. Effective January 1, 2020, the Company consolidated the insignificant PCI loans and discounts for Peoples, Waccamaw, and other acquired loans into the core loan portfolio. The only remaining PCI pools are those loans acquired in the Highlands acquisition on December 31, 2019.

The following table presents the recorded investment and contractual unpaid principal balance of PCI loans, by acquisition, as of the dates indicated:

	*September 30, 2020*				*December 31, 2019*
			*Unpaid Principal*				*Unpaid Principal*
(Amounts in thousands)	*Recorded Investment*		*Balance*		*Recorded Investment*		*Balance*
PCI Loans, by acquisition
Peoples	$	-	$	-	$	5,071	$	6,431
Waccamaw		-		-		2,708		14,277
Highlands		43,527		53,295		53,116		64,096
Other acquired		-		-		352		378
Total PCI Loans	$	43,527	$	53,295	$	61,247	$	85,182

The following table presents the changes in the accretable yield on PCI loans, by acquisition, during the periods indicated:

	*Peoples*			*Waccamaw*			*Highlands*			*Total*
(Amounts in thousands)
Balance January 1, 2019	$	2,590		$	14,639		$	-		$	17,229
Accretion		(734	)		(2,761	)		-			(3,495	)
Reclassifications (to) from nonaccretable difference⁽¹⁾		14			1,200			-			1,214
Other changes, net		167			141			-			308
Balance September 30, 2019	$	2,037		$	13,219		$	-		$	15,256

Balance January 1, 2020	$	1,890		$	12,574		$	8,152		$	22,616
Accretion		-			-			(1,952	)		(1,952	)
Reclassifications from nonaccretable difference⁽¹⁾		-			-			-			-
Other changes, net		(1,890	)		(12,574	)		-			(14,464	)
Balance September 30, 2020	$	-		$	-		$	6,200		$	6,200

(1) Represents changes attributable to expected loss assumptions