Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses Portfolio Segmentation: Major categories of loans are summarized as follows (in thousands): September 30, 2019 December 31, 2018 PCI Loans 1 All Other 2 Total PCI Loans 1 All Other 2 Total Commercial real estate $ 17,880 $ 872,582 $ 890,462 $ 17,682 $ 842,345 $ 860,027 Consumer real estate 7,169 398,362 405,531 8,712 398,542 407,254 Construction and land development 4,629 215,122 219,751 4,602 183,293 187,895 Commercial and industrial 434 340,773 341,207 2,557 305,697 308,254 Consumer and other 359 10,437 10,796 605 13,204 13,809 Total loans 30,471 1,837,276 1,867,747 34,158 1,743,081 1,777,239 Less: Allowance for loan losses (116 ) (9,676 ) (9,792 ) — (8,275 ) (8,275 ) Loans, net $ 30,355 $ 1,827,600 $ 1,857,955 $ 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 September 30, 2019: Performing loans $ 872,325 $ 397,217 $ 214,422 $ 340,322 $ 10,437 $ 1,834,723 Impaired loans 257 1,145 700 451 — 2,553 872,582 398,362 215,122 340,773 10,437 1,837,276 PCI loans 17,880 7,169 4,629 434 359 30,471 Total loans $ 890,462 $ 405,531 $ 219,751 $ 341,207 $ 10,796 $ 1,867,747 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 September 30, 2019: Performing loans $ 4,225 $ 1,983 $ 1,043 $ 1,725 $ 71 $ 9,047 Impaired loans — 206 — 423 — 629 4,225 2,189 1,043 2,148 71 9,676 PCI loans 35 81 — — — 116 Total loans $ 4,260 $ 2,270 $ 1,043 $ 2,148 $ 71 $ 9,792 December 31, 2018: Performing loans $ 3,639 $ 1,763 $ 795 $ 1,304 $ 240 $ 7,741 Impaired loans — 26 — 442 66 534 3,639 1,789 795 1,746 306 8,275 PCI loans — — — — — — Total loans $ 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 September 30, 2019: Beginning balance $ 4,102 $ 2,189 $ 946 $ 1,746 $ 114 $ 9,097 Charged off loans (36 ) (1 ) — (20 ) (50 ) (107 ) Recoveries of charge-offs 39 17 3 12 7 78 Provision (reallocation) charged to expense 155 65 94 410 — 724 Ending balance $ 4,260 $ 2,270 $ 1,043 $ 2,148 $ 71 $ 9,792 Three Months Ended September 30, 2018: Beginning balance $ 3,135 $ 1,528 $ 744 $ 1,367 $ 300 $ 7,074 Charged off loans — (2 ) — (100 ) (156 ) (258 ) Recoveries of charge-offs — 5 2 9 22 38 Provision (reallocation) charged to expense 110 67 (37 ) 86 76 302 Ending balance $ 3,245 $ 1,598 $ 709 $ 1,362 $ 242 $ 7,156 Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Nine Months Ended September 30, 2019: Beginning balance $ 3,639 $ 1,789 $ 795 $ 1,746 $ 306 $ 8,275 Charged off loans (36 ) (3 ) — (353 ) (260 ) (652 ) Recoveries of charge-offs 63 37 7 66 82 255 Provision (reallocation) charged to expense 594 447 241 689 (57 ) 1,914 Ending balance $ 4,260 $ 2,270 $ 1,043 $ 2,148 $ 71 $ 9,792 Nine Months Ended September 30, 2018: Beginning balance $ 2,465 $ 1,596 $ 521 $ 1,062 $ 216 $ 5,860 Charged off loans (38 ) (27 ) — (178 ) (257 ) (500 ) Recoveries of charge-offs — 55 7 65 62 189 Provision (reallocation) charged to expense 818 (26 ) 181 413 221 1,607 Ending balance $ 3,245 $ 1,598 $ 709 $ 1,362 $ 242 $ 7,156 The following tables outline the amount of each loan classification and the amount categorized into each risk rating (in thousands): September 30, 2019 Non PCI Loans: Commercial Real Estate Consumer Real Estate Construction and Land Development Commercial and Industrial Consumer and Other Total Pass $ 856,238 $ 394,525 $ 209,029 $ 332,165 $ 10,273 $ 1,802,230 Watch 15,488 2,503 5,164 7,433 42 30,630 Special mention 489 9 155 612 1 1,266 Substandard 367 1,159 774 556 97 2,953 Doubtful — 166 — 7 24 197 Total $ 872,582 $ 398,362 $ 215,122 $ 340,773 $ 10,437 $ 1,837,276 PCI Loans: Pass $ 13,760 $ 4,969 $ 516 $ 53 $ 325 $ 19,623 Watch 2,497 383 4,113 1 15 7,009 Special mention 886 435 — — 5 1,326 Substandard 737 1,382 — 380 14 2,513 Doubtful — — — — — — Total $ 17,880 $ 7,169 $ 4,629 $ 434 $ 359 $ 30,471 Total loans $ 890,462 $ 405,531 $ 219,751 $ 341,207 $ 10,796 $ 1,867,747 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): September 30, 2019 30-60 Days 61-89 Days Past Due and Accruing Past Due 90 Nonaccrual Total PCI Loans Current Total Commercial real estate $ 175 $ — $ — $ 124 $ 299 $ 17,880 $ 872,283 $ 890,462 Consumer real estate 321 391 497 1,403 2,612 6,672 396,247 405,531 Construction and land development 271 — — 621 892 4,629 214,230 219,751 Commercial and industrial 684 166 95 377 1,322 339 339,546 341,207 Consumer and other 184 77 16 39 316 343 10,137 10,796 Total $ 1,635 $ 634 $ 608 $ 2,564 $ 5,441 $ 29,863 $ 1,832,443 $ 1,867,747 December 31, 2018 30-60 Days 61-89 Days Past Due and Accruing Past Due 90 Nonaccrual Total PCI Current Total 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): September 30, 2019 December 31, 2018 Recorded Unpaid Related Recorded Investment Unpaid Principal Balance Related Allowance Impaired loans without a valuation allowance: Commercial real estate $ 257 $ 262 $ — $ 636 $ 648 $ — Consumer real estate 751 751 — 1,073 1,089 — Construction and land development 700 700 — 547 547 — Commercial and industrial — — — 69 70 — Consumer and other — — — 29 33 — 1,708 1,713 — 2,354 2,387 — Impaired loans with a valuation allowance: Commercial real estate — — — — — — Consumer real estate 394 394 206 163 205 26 Construction and land development — — — — — — Commercial and industrial 451 451 423 955 973 442 Consumer and other — — — 87 87 66 845 845 629 1,205 1,265 534 PCI loans: Commercial real estate 2,516 2,834 35 — — — Consumer real estate 1,206 1,261 81 — — — 3,722 4,095 116 — — — Total impaired loans $ 6,275 $ 6,653 $ 745 $ 3,559 $ 3,652 $ 534 Three Months Ended September 30, 2019 2018 Average Interest Average Recorded Investment Interest Income Recognized Impaired loans without a valuation allowance: Commercial real estate $ 258 $ 3 $ 1,117 $ 12 Consumer real estate 568 4 887 10 Construction and land development 701 3 547 — Commercial and industrial — — 77 2 Consumer and other — — 16 1 1,527 10 2,644 25 Impaired loans with a valuation allowance: Commercial real estate — — — — Consumer real estate 396 4 290 2 Construction and land development — — — — Commercial and industrial 352 1 393 5 Consumer and other — — 73 1 748 5 756 8 PCI loans: Commercial real estate 2,520 — 29 — Consumer real estate 1,151 — — — 3,671 — 29 — Total impaired loans $ 5,946 $ 15 $ 3,429 $ 33 Nine Months Ended September 30, 2019 2018 Average Interest Average Recorded Investment Interest Income Recognized Impaired loans without a valuation allowance: Commercial real estate $ 435 $ 28 $ 802 $ 27 Consumer real estate 768 8 769 22 Construction and land development 637 5 547 — Commercial and industrial 25 1 62 5 Consumer and other 14 1 8 1 1,879 43 2,188 55 Impaired loans with a valuation allowance: Commercial real estate 12 1 6 — Consumer real estate 248 6 576 13 Construction and land development 14 — — — Commercial and industrial 498 10 280 10 Consumer and other 28 — 68 3 800 17 930 26 PCI loans: Commercial real estate 1,894 (10 ) 11 3 Consumer real estate 851 3 — — 2,745 (7 ) 11 3 Total impaired loans $ 5,424 $ 53 $ 3,129 $ 84 Troubled Debt Restructurings: At September 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 September 30, 2019 and December 31, 2018 , management had approximately $61 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 TDRs during the nine month period ended September 30, 2019. There was one commercial real estate loan for approximately $622 thousand and one consumer real estate loan for approximately $34 thousand modified as TDRs during the nine month period ended September 30, 2018. There were no loans that were modified as troubled debt restructurings during the past nine months and for which there was a subsequent payment default. Foreclosure Proceedings and Balances : As of September 30, 2019, there was no 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): September 30, December 31, 2019 2018 Commercial real estate $ 24,651 $ 24,849 Consumer real estate 9,127 11,108 Construction and land development 2,697 5,731 Commercial and industrial 5,633 5,824 Consumer and other 556 892 Total loans 42,664 48,404 Less: Remaining purchase discount (12,193 ) (14,246 ) Total loans, net of purchase discount 30,471 34,158 Less: Allowance for loan losses (116 ) — Carrying amount, net of allowance $ 30,355 $ 34,158 Activity related to the accretable yield on loans acquired with deteriorated credit quality is as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2019 2018 2019 2018 Accretable yield, beginning of period $ 8,280 $ 7,206 $ 7,052 $ 9,287 Additions — — — 1,292 Accretion income (1,073 ) (746 ) (3,353 ) (3,776 ) Reclassification 1,033 2,516 2,392 2,898 Other changes, net 390 243 2,539 (482 ) Accretable yield, end of period $ 8,630 $ 9,219 $ 8,630 $ 9,219 |