Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses Portfolio Segmentation: At March 31, 2019 and December 31, 2018 , loans are summarized as follows (in thousands): March 31, 2019 December 31, 2018 PCI Loans 1 All Other Loans Total PCI Loans 1 All Other Loans Total Commercial real estate $ 17,299 $ 871,643 $ 888,942 $ 17,682 $ 842,345 $ 860,027 Consumer real estate 8,146 402,835 410,981 8,712 398,542 407,254 Construction and land development 4,670 182,339 187,009 4,602 183,293 187,895 Commercial and industrial 2,300 339,171 341,471 2,557 305,697 308,254 Consumer and other 453 11,713 12,166 605 13,204 13,809 Total loans 32,868 1,807,701 1,840,569 34,158 1,743,081 1,777,239 Less: Allowance for loan losses (54 ) (8,650 ) (8,704 ) — (8,275 ) (8,275 ) Loans, net $ 32,814 $ 1,799,051 $ 1,831,865 $ 34,158 $ 1,734,806 $ 1,768,964 1 Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase. For purposes of the disclosures required pursuant to the adoption of ASC 310, the loan portfolio was disaggregated into segments. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. There are five loan portfolio segments that include commercial real estate, consumer real estate, construction and land development, commercial and industrial, and consumer and other. Note 4. Loans and Allowance for Loan Losses, Continued Credit Risk Management: The composition of loans by loan classification for impaired and performing loan status at March 31, 2019 and December 31, 2018 , is summarized in the tables below (in thousands): March 31, 2019 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Performing loans $ 871,007 $ 401,937 $ 181,684 $ 338,806 $ 11,660 $ 1,805,094 Impaired loans 636 898 655 365 53 2,607 871,643 402,835 182,339 339,171 11,713 1,807,701 PCI loans 17,299 8,146 4,670 2,300 453 32,868 Total $ 888,942 $ 410,981 $ 187,009 $ 341,471 $ 12,166 $ 1,840,569 December 31, 2018 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Performing loans $ 841,709 $ 397,306 $ 182,746 $ 304,673 $ 13,088 $ 1,739,522 Impaired loans 636 1,236 547 1,024 116 3,559 842,345 398,542 183,293 305,697 13,204 1,743,081 PCI loans 17,682 8,712 4,602 2,557 605 34,158 Total loans $ 860,027 $ 407,254 $ 187,895 $ 308,254 $ 13,809 $ 1,777,239 The following tables show the allowance for loan losses allocation by loan classification for impaired, PCI, and performing loans as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Performing loans $ 4,023 $ 1,902 $ 846 $ 1,545 $ 114 $ 8,430 PCI loans 40 14 — — — 54 Impaired loans 11 33 8 164 4 220 Total $ 4,074 $ 1,949 $ 854 $ 1,709 $ 118 $ 8,704 December 31, 2018 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Performing loans $ 3,639 $ 1,763 $ 795 $ 1,304 $ 240 $ 7,741 PCI loans — — — — — — Impaired loans — 26 — 442 66 534 Total $ 3,639 $ 1,789 $ 795 $ 1,746 $ 306 $ 8,275 Note 4. Loans and Allowance for Loan Losses, Continued Credit Risk Management (continued): The following tables detail the changes in the allowance for loan losses for the three month periods ending March 31, 2019 and March 31, 2018, by loan classification (in thousands): March 31, 2019 Commercial Consumer Construction Commercial Consumer Total Beginning balance $ 3,639 $ 1,789 $ 795 $ 1,746 $ 306 $ 8,275 Loans charged off — (2 ) — (318 ) (130 ) (450 ) Recoveries of loans charged off 2 4 2 12 62 82 Provision (reallocation) charged to expense 433 158 57 269 (120 ) 797 Ending balance $ 4,074 $ 1,949 $ 854 $ 1,709 $ 118 $ 8,704 March 31, 2018 Commercial Consumer Construction Commercial Consumer Total Beginning balance $ 2,465 $ 1,596 $ 521 $ 1,062 $ 216 $ 5,860 Loans charged off (38 ) — — (78 ) (42 ) (158 ) Recoveries of charge-offs — 23 2 40 21 86 Provision (reallocation) charged to expense 498 (100 ) 104 186 1 689 Ending balance $ 2,925 $ 1,519 $ 627 $ 1,210 $ 196 $ 6,477 The following table details the changes in the allowance for loan losses for the year ending December 31, 2018 , by loan classification (in thousands): December 31, 2018 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Beginning balance $ 2,465 $ 1,596 $ 521 $ 1,062 $ 216 $ 5,860 Loans charged off (38 ) (275 ) — (177 ) (370 ) (860 ) Recoveries of charge-offs 2 100 9 72 156 339 Provision (reallocation) charged to expense 1,210 368 265 789 304 2,936 Ending balance $ 3,639 $ 1,789 $ 795 $ 1,746 $ 306 $ 8,275 Note 4. Loans and Allowance for Loan Losses, Continued Credit Risk Management (continued): The following tables outline the amount of each loan classification and the amount categorized into each risk rating as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 Non PCI Loans Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Pass $ 863,455 $ 400,139 $ 180,904 $ 333,423 $ 11,527 $ 1,789,448 Watch 7,547 1,775 623 4,228 131 14,304 Special mention — 15 157 1,155 — 1,327 Substandard 641 906 655 357 55 2,614 Doubtful — — — 8 — 8 Total $ 871,643 $ 402,835 $ 182,339 $ 339,171 $ 11,713 $ 1,807,701 PCI Loans Pass $ 12,825 $ 5,555 $ 3,554 $ 2,196 $ 397 $ 24,527 Watch 2,736 581 1,116 — 16 4,449 Special mention 1,010 440 — — 9 1,459 Substandard 728 1,570 — 104 31 2,433 Doubtful — — — — — — Total $ 17,299 $ 8,146 $ 4,670 $ 2,300 $ 453 $ 32,868 Total loans $ 888,942 $ 410,981 $ 187,009 $ 341,471 $ 12,166 $ 1,840,569 December 31, 2018 Non PCI Loans Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Pass $ 834,912 $ 394,728 $ 182,524 $ 303,805 $ 12,927 $ 1,728,896 Watch 6,791 2,678 64 1,090 135 10,758 Special mention — 14 158 137 — 309 Substandard 642 1,122 547 462 142 2,915 Doubtful — — — 203 — 203 Total $ 842,345 $ 398,542 $ 183,293 $ 305,697 $ 13,204 $ 1,743,081 PCI Loans Pass $ 14,050 $ 5,617 $ 4,033 $ 2,382 $ 541 $ 26,623 Watch 1,805 756 569 — 17 3,147 Special mention 1,030 446 — 50 10 1,536 Substandard 797 1,893 — 125 37 2,852 Doubtful — — — — — — Total $ 17,682 $ 8,712 $ 4,602 $ 2,557 $ 605 $ 34,158 Total loans $ 860,027 $ 407,254 $ 187,895 $ 308,254 $ 13,809 $ 1,777,239 Note 4. Loans and Allowance for Loan Losses, Continued Past Due Loans: A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. Generally, management places a loan on nonaccrual when there is a clear indicator that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due. The following tables present the aging of the recorded investment in loans as of March 31, 2019 and December 31, 2018 (in thousands): March 31, 2019 30-60 Days Past Due and Accruing 61-89 Days Past Due and Accruing Past Due 90 Days or More and Accruing Nonaccrual Total Past Due and NonAccrual PCI Loans Current Loans Total Loans Commercial real estate $ 1,625 $ 764 $ — $ 272 $ 2,661 $ 17,299 $ 868,982 $ 888,942 Consumer real estate 1,492 123 73 807 2,495 8,146 400,340 410,981 Construction and land development — 79 — 655 734 4,670 181,605 187,009 Commercial and industrial 92 165 114 296 667 2,300 338,504 341,471 Consumer and other 132 131 23 42 328 453 11,385 12,166 Total $ 3,341 $ 1,262 $ 210 $ 2,072 $ 6,885 $ 32,868 $ 1,800,816 $ 1,840,569 December 31, 2018 30-60 Days Past Due and Accruing 61-89 Days Past Due and Accruing Past Due 90 Days or More and Accruing Nonaccrual Total Past Due and NonAccrual PCI Loans Current Loans Total Loans Commercial real estate $ 377 $ 19 $ — $ 272 $ 668 $ 17,682 $ 841,677 $ 860,027 Consumer real estate 1,168 462 454 844 2,928 8,712 395,614 407,254 Construction and land development 343 — — 547 890 4,602 182,403 187,895 Commercial and industrial 155 — 101 909 1,165 2,557 304,532 308,254 Consumer and other 117 — 29 124 270 605 12,934 13,809 Total $ 2,160 $ 481 $ 584 $ 2,696 $ 5,921 $ 34,158 $ 1,737,160 $ 1,777,239 Note 4. Loans and Allowance for Loan Losses, Continued Impaired Loans: The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded as of March 31, 2019 and December 31, 2018 (in thousands): For the three months ended At March 31, 2019 March 31, 2019 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized Impaired loans without a valuation allowance: Commercial real estate $ 589 $ 601 $ — $ 613 $ 20 Consumer real estate 863 879 — 967 4 Construction and land development 599 599 — 573 — Commercial and industrial 31 32 — 50 1 Consumer and other 27 31 — 28 1 2,109 2,142 — 2,231 26 Impaired loans with a valuation allowance: Commercial real estate 47 47 11 24 1 Consumer real estate 35 40 33 99 — Construction and land development 56 56 8 28 — Commercial and industrial 334 349 164 644 9 Consumer and other 26 26 4 57 — 498 518 220 852 10 PCI loans: Commercial real estate 2,535 2,837 40 845 (10 ) Consumer real estate 1,101 1,271 14 367 3 Total impaired loans $ 6,243 $ 6,768 $ 274 $ 4,295 $ 29 Note 4. Loans and Allowance for Loan Losses, Continued Impaired Loans (continued): For the year ended At December 31, 2018 December 31, 2018 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized Impaired loans without a valuation allowance: Commercial real estate $ 636 $ 648 $ — $ 855 $ 33 Consumer real estate 1,073 1,089 — 934 29 Construction and land development 547 547 — 547 — Commercial and industrial 69 70 — 69 6 Consumer and other 29 33 — 15 3 2,354 2,387 — 2,420 71 Impaired loans with a valuation allowance: Commercial real estate — — — — — Consumer real estate 163 205 26 365 — Construction and land development — — — — — Commercial and industrial 955 973 442 476 37 Consumer and other 87 87 66 86 3 1,205 1,265 534 927 40 PCI loans: Commercial real estate 0 0 0 11 0 Total impaired loans $ 3,559 $ 3,652 $ 534 $ 3,358 $ 111 Troubled Debt Restructurings: At March 31, 2019 and December 31, 2018 , impaired loans included loans that were classified as Troubled Debt Restructurings ("TDRs"). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession. In assessing whether or not a borrower is experiencing financial difficulties, the Company considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy; and (iv) the debtor's projected cash flow is sufficient to satisfy contractual payments due under the original terms of the loan without a modification. The Company considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by the Company include the debtor's ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan. Note 4. Loans and Allowance for Loan Losses, Continued Troubled Debt Restructurings (continued): The most common concessions granted by the Company generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt; (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk; (iii) a temporary period of interest-only payments; and (iv) a reduction in the contractual payment amount for either a short period or remaining term of the loan. As of March 31, 2019 and December 31, 2018 , management had approximately $62 thousand and $116 thousand, respectively, in loans that met the criteria for restructured, none of which were on nonaccrual. A loan is placed back on accrual status when both principal and interest are current and it is probable that management will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement. There were no loans that were modified as troubled debt restructurings during the three month period ended March 31, 2019 and 2018. There were no loans that were modified as troubled debt restructurings during the past three months and for which there was a subsequent payment default. Foreclosure Proceedings and Balances : As of March 31, 2019, there was no residential real estate included in foreclosed assets and there were no consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure. Purchased Credit Impaired Loans: The Company has acquired loans where there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans as of as of March 31, 2019 and December 31, 2018 is as follows (in thousands): March 31, 2019 December 31, 2018 Commercial real estate $ 24,226 $ 24,849 Consumer real estate 10,464 11,108 Construction and land development 5,724 5,731 Commercial and industrial 5,369 5,824 Consumer and other 721 892 Total loans 46,504 48,404 Less remaining purchase discount (13,636 ) (14,246 ) Total loans, net of purchase discount 32,868 34,158 Less: Allowance for loan losses (54 ) — Carrying amount, net of allowance $ 32,814 $ 34,158 Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows for the three month periods ended March 31, 2019 and 2018 (in thousands): Three Months Ended March 31, 2019 2018 Accretable yield, beginning of period $ 7,052 $ 9,287 Additions — — Accretion income (1,254 ) (1,101 ) Reclassification to accretable 1,035 262 Other changes, net 1,811 (668 ) Accretable yield $ 8,644 $ 7,780 |