Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses Portfolio Segmentation: Major categories of loans are summarized as follows (in thousands): June 30, 2019 December 31, 2018 PCI Loans 1 All Other 2 Total PCI Loans 1 All Other 2 Total Commercial real estate $ 17,040 $ 861,547 $ 878,587 $ 17,682 $ 842,345 $ 860,027 Consumer real estate 7,412 398,844 406,256 8,712 398,542 407,254 Construction and land development 4,669 200,027 204,696 4,602 183,293 187,895 Commercial and industrial 2,137 333,361 335,498 2,557 305,697 308,254 Consumer and other 400 11,552 11,952 605 13,204 13,809 Total loans 31,658 1,805,331 1,836,989 34,158 1,743,081 1,777,239 Less: Allowance for loan losses (54 ) (9,043 ) (9,097 ) — (8,275 ) (8,275 ) Loans, net $ 31,604 $ 1,796,288 $ 1,827,892 $ 34,158 $ 1,734,806 $ 1,768,964 1 Purchased Credit Impaired loans (“PCI loans”) are loans with evidence of credit deterioration at purchase. 2 Includes loans held for sale. 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. The composition of loans by loan classification for impaired and performing loan status is summarized in the tables below (in thousands): Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total June 30, 2019: Performing loans $ 861,288 $ 398,061 $ 199,326 $ 333,109 $ 11,552 $ 1,803,336 Impaired loans 259 783 701 252 — 1,995 861,547 398,844 200,027 333,361 11,552 1,805,331 PCI loans 17,040 7,412 4,669 2,137 400 31,658 Total $ 878,587 $ 406,256 $ 204,696 $ 335,498 $ 11,952 $ 1,836,989 December 31, 2018: 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 (in thousands): Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total June 30, 2019: Performing loans $ 4,062 $ 1,935 $ 946 $ 1,641 $ 114 $ 8,698 PCI loans 40 14 — — — 54 Impaired loans — 240 — 105 — 345 Total $ 4,102 $ 2,189 $ 946 $ 1,746 $ 114 $ 9,097 December 31, 2018: 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 The following tables detail the changes in the allowance for loan losses by loan classification (in thousands): Commercial Consumer Construction Commercial Consumer Total Three Months Ended June 30, 2019: Beginning balance $ 4,074 $ 1,949 $ 854 $ 1,709 $ 118 $ 8,704 Loans charged off — — — (14 ) (80 ) (94 ) Recoveries of charge-offs 22 16 2 41 13 94 Provision (reallocation) charged to expense 6 224 90 10 63 393 Ending balance $ 4,102 $ 2,189 $ 946 $ 1,746 $ 114 $ 9,097 Three Months Ended June 30, 2018: Beginning balance $ 2,925 $ 1,519 $ 627 $ 1,210 $ 196 $ 6,477 Loans charged off — (25 ) — — (59 ) (84 ) Recoveries of charge-offs — 27 3 16 18 64 Provision (reallocation) charged to expense 210 7 114 141 145 617 Ending balance $ 3,135 $ 1,528 $ 744 $ 1,367 $ 300 $ 7,074 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Six Months Ended June 30, 2019: Beginning balance $ 3,639 $ 1,789 $ 795 $ 1,746 $ 306 $ 8,275 Loans charged off — (2 ) — (333 ) (210 ) (545 ) Recoveries of charge-offs 24 20 4 53 76 177 Provision (reallocation) charged to expense 439 382 147 280 (58 ) 1,190 Ending balance $ 4,102 $ 2,189 $ 946 $ 1,746 $ 114 $ 9,097 Six Months Ended June 30, 2018: Beginning balance $ 2,465 $ 1,596 $ 521 $ 1,062 $ 216 $ 5,860 Loans charged off (38 ) (25 ) — (78 ) (101 ) (242 ) Recoveries of charge-offs — 50 5 56 40 151 Provision (reallocation) charged to expense 708 (93 ) 218 327 145 1,305 Ending balance $ 3,135 $ 1,528 $ 744 $ 1,367 $ 300 $ 7,074 The following tables outline the amount of each loan classification and the amount categorized into each risk rating (in thousands): June 30, 2019 Non PCI Loans: Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Pass $ 848,287 $ 395,438 $ 198,469 $ 326,328 $ 11,459 $ 1,779,981 Watch 12,387 2,353 624 5,492 44 20,900 Special mention 500 8 156 1,181 — 1,845 Substandard 373 875 778 352 25 2,403 Doubtful — 170 — 8 24 202 Total $ 861,547 $ 398,844 $ 200,027 $ 333,361 $ 11,552 $ 1,805,331 PCI Loans: Pass $ 12,795 $ 5,050 $ 3,576 $ 2,039 $ 354 $ 23,814 Watch 2,463 453 1,093 3 14 4,026 Special mention 920 434 — — 7 1,361 Substandard 862 1,475 — 95 25 2,457 Doubtful — — — — — — Total $ 17,040 $ 7,412 $ 4,669 $ 2,137 $ 400 $ 31,658 Total loans $ 878,587 $ 406,256 $ 204,696 $ 335,498 $ 11,952 $ 1,836,989 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 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 an aging analysis of our loan portfolio (in thousands): June 30, 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 $ 133 $ — $ 139 $ 124 $ 396 $ 17,040 $ 861,151 $ 878,587 Consumer real estate 1,026 226 441 1,024 2,717 7,412 396,127 406,256 Construction and land development 838 112 — 624 1,574 4,669 198,453 204,696 Commercial and industrial 417 30 95 336 878 2,137 332,483 335,498 Consumer and other 131 — 15 40 186 400 11,366 11,952 Total $ 2,545 $ 368 $ 690 $ 2,148 $ 5,751 $ 31,658 $ 1,799,580 $ 1,836,989 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 Impaired Loans: The following is an analysis of the impaired loan portfolio, including PCI loans, detailing the related allowance recorded (in thousands): June 30, 2019 December 31, 2018 Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance Impaired loans without a valuation allowance: Commercial real estate $ 259 $ 263 $ — $ 636 $ 648 $ — Consumer real estate 385 386 — 1,073 1,089 — Construction and land development 701 701 — 547 547 — Commercial and industrial — — — 69 70 — Consumer and other — — — 29 33 — 1,345 1,350 — 2,354 2,387 — Impaired loans with a valuation allowance: Commercial real estate — — — — — — Consumer real estate 398 399 240 163 205 26 Construction and land development — — — — — — Commercial and industrial 252 267 105 955 973 442 Consumer and other — — — 87 87 66 650 666 345 1,205 1,265 534 PCI loans: Commercial real estate 2,523 2,834 40 — — — Consumer real estate 1,096 1,261 14 — — — 3,619 4,095 54 — — — Total impaired loans $ 5,614 $ 6,111 $ 399 $ 3,559 $ 3,652 $ 534 Three Months Ended June 30, 2019 2018 Average Interest Average Recorded Investment Interest Income Recognized Impaired loans without a valuation allowance: Commercial real estate $ 424 $ 5 $ 793 $ 8 Consumer real estate 624 — 841 7 Construction and land development 650 2 547 — Commercial and industrial 16 — 67 2 Consumer and other 14 — 8 — 1,728 7 2,256 17 Impaired loans with a valuation allowance: Commercial real estate 24 — — — Consumer real estate 217 2 460 — Construction and land development 28 — — — Commercial and industrial 293 — 300 3 Consumer and other 13 — 103 1 575 2 863 4 PCI loans: Commercial real estate 2,529 — 14 — Consumer real estate 1,099 — — — 3,628 — 14 — Total impaired loans $ 5,931 $ 9 $ 3,133 $ 21 Six Months Ended June 30, 2019 2018 Average Interest Average Recorded Investment Interest Income Recognized Impaired loans without a valuation allowance: Commercial real estate $ 495 $ 25 $ 670 $ 15 Consumer real estate 774 4 699 12 Construction and land development 616 1 547 — Commercial and industrial 33 1 58 3 Consumer and other 19 — 5 — 1,937 31 1,979 30 Impaired loans with a valuation allowance: Commercial real estate 16 — 8 — Consumer real estate 199 9 642 11 Construction and land development 19 — — — Commercial and industrial 514 9 257 5 Consumer and other 38 — 72 2 786 18 979 18 PCI loans: Commercial real estate 1,686 (9 ) 5 3 Consumer real estate 732 2 — — 2,418 (7 ) 5 3 Total impaired loans $ 5,141 $ 42 $ 2,963 $ 51 Troubled Debt Restructurings: At June 30, 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. 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 June 30, 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. There were no loans that were modified as troubled debt restructurings during the six month period ended June 30, 2019. There was one commercial real estate loan for approximately $622 thousand modified as troubled debt restructurings during the six month period ended June 30, 2018. There were no loans that were modified as troubled debt restructurings during the past six months and for which there was a subsequent payment default. Foreclosure Proceedings and Balances : As of June 30, 2019, there was $257 thousand residential real estate included in other real estate owned 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 are as follows (in thousands): June 30, 2019 December 31, 2018 Commercial real estate $ 23,895 $ 24,849 Consumer real estate 9,556 11,108 Construction and land development 5,700 5,731 Commercial and industrial 5,125 5,824 Consumer and other 612 892 Total loans 44,888 48,404 Less: Remaining purchase discount (13,230 ) (14,246 ) Total loans, net of purchase discount 31,658 34,158 Less: Allowance for loan losses (54 ) — Carrying amount, net of allowance $ 31,604 $ 34,158 Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Accretable yield, beginning of period $ 8,644 $ 7,780 $ 7,052 $ 9,287 Additions — 1,292 — 1,292 Accretion income (1,026 ) (1,928 ) (2,280 ) (3,029 ) Reclassification 323 120 1,358 382 Other changes, net 339 (58 ) 2,150 (726 ) Accretable yield, end of period $ 8,280 $ 7,206 $ 8,280 $ 7,206 |