Loans | (5 ) Loans The following table sets forth information concerning the loan portfolio by collateral types as of December 31, 2018 and 2017 are: December 31, 2018 December 30, 2017 Loans excluding PCI loans Real estate loans Residential $ 1,702,114 $ 1,025,303 Commercial 4,454,098 2,546,143 Land, development and construction 635,562 235,816 Total real estate 6,791,774 3,807,262 Commercial 1,183,380 693,501 Consumer and other loans 203,686 107,480 Loans before unearned fees and deferred cost 8,178,840 4,608,243 Net unearned fees and costs 2,693 820 Total loans excluding PCI loans 8,181,533 4,609,063 PCI loans (note 1) Real estate loans Residential 58,804 59,975 Commercial 87,336 92,791 Land, development and construction 7,028 6,656 Total real estate 153,168 159,422 Commercial 5,594 4,444 Consumer and other loans 209 292 Total PCI loans 158,971 164,158 Total loans 8,340,504 4,773,221 Allowance for loan losses for loans that are not PCI loans (39,579 ) (32,530 ) Allowance for loan losses for PCI loans (191 ) (295 ) Total loans, net of allowance for loan losses $ 8,300,734 $ 4,740,396 Note 1: Purchased credit-impaired (“PCI”) loans are being accounted for pursuant to ASC Topic 310-30. The following tables present the activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2018, 2017 and 2016. Real Estate Loans Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses for loans that are not PCI loans: Twelve months ended December 31, 2018 Beginning of the period $ 6,003 $ 19,304 $ 1,179 $ 4,130 $ 1,914 $ 32,530 Charge-offs (516 ) (13 ) (126 ) (1,474 ) (1,706 ) (3,835 ) Recoveries 1,027 679 39 360 327 2,432 Provision for loan losses (996 ) 3,008 689 3,398 2,353 8,452 Balance at end of period $ 5,518 $ 22,978 $ 1,781 $ 6,414 $ 2,888 $ 39,579 Twelve months ended December 31, 2017 Beginning of the period $ 5,640 $ 14,713 $ 883 $ 3,785 $ 1,548 $ 26,569 Charge-offs (254 ) (74 ) — (677 ) (994 ) (1,999 ) Recoveries 950 662 596 334 217 2,759 Provision for loan losses (333 ) 4,003 (300 ) 688 1,143 5,201 Balance at end of period $ 6,003 $ 19,304 $ 1,179 $ 4,130 $ 1,914 $ 32,530 Twelve months ended December 31, 2016 Beginning of the period $ 6,015 $ 10,559 $ 936 $ 3,212 $ 1,421 $ 22,143 Charge-offs (290 ) (1,190 ) (232 ) (186 ) (849 ) (2,747 ) Recoveries 1,220 625 269 325 189 2,628 Provision for loan losses (1,305 ) 4,719 (90 ) 434 787 4,545 Balance at end of period $ 5,640 $ 14,713 $ 883 $ 3,785 $ 1,548 $ 26,569 Real Estate Loans Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses for loans that are PCI loans: Twelve months ended December 31, 2018 Beginning of the period $ — $ 59 $ 222 $ — $ 14 $ 295 Charge-offs — — — (10 ) — (10 ) Recoveries — — — 75 — 75 Provision for loan losses — (59 ) (45 ) (65 ) — (169 ) Balance at end of period $ — $ — $ 177 $ — $ 14 $ 191 Twelve months ended December 31, 2017 Beginning of the period $ 54 $ 92 $ 312 $ — $ 14 $ 472 Charge-offs — — — — — — Recoveries — 66 — — — 66 Provision for loan losses (54 ) (99 ) (90 ) — — (243 ) Balance at end of period $ — $ 59 $ 222 $ — $ 14 $ 295 Twelve months ended December 31, 2016 Beginning of the period $ — $ 103 $ 1 $ 3 $ 14 $ 121 Charge-offs — — (66 ) — — (66 ) Recoveries — — — — — — Provision for loan losses 54 (11 ) 377 (3 ) — 417 Balance at end of period $ 54 $ 92 $ 312 $ — $ 14 $ 472 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2018 and 2017. Accrued interest receivable and unearned fees/costs are not included in the recorded investment because they are not material. Real Estate Loans As of December 31, 2018 Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 331 $ 250 $ — $ 1,034 $ 1 $ 1,616 Collectively evaluated for impairment 5,187 22,728 1,781 5,380 2,887 37,963 Purchased credit-impaired — — 177 — 14 191 Total ending allowance balance $ 5,518 $ 22,978 $ 1,958 $ 6,414 $ 2,902 $ 39,770 Loans: Individually evaluated for impairment $ 6,234 $ 7,496 $ 117 $ 1,708 $ 145 $ 15,700 Collectively evaluated for impairment 1,695,880 4,446,602 635,445 1,181,672 203,541 8,163,140 Purchased credit-impaired 58,804 87,336 7,028 5,594 209 158,971 Total ending loan balances $ 1,760,918 $ 4,541,434 $ 642,590 $ 1,188,974 $ 203,895 $ 8,337,811 Real Estate Loans As of December 31, 2017 Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 586 $ — $ 4 $ 206 $ 8 $ 804 Collectively evaluated for impairment 5,417 19,304 1,175 3,924 1,906 31,726 Purchased credit-impaired — 59 222 — 14 295 Total ending allowance balance $ 6,003 $ 19,363 $ 1,401 $ 4,130 $ 1,928 $ 32,825 Loans: Individually evaluated for impairment $ 8,101 $ 8,218 $ 331 $ 3,497 $ 198 $ 20,345 Collectively evaluated for impairment 1,017,202 2,537,925 235,485 690,004 107,282 4,587,898 Purchased credit-impaired 59,975 92,791 6,656 4,444 292 164,158 Total ending loan balance $ 1,085,278 $ 2,638,934 $ 242,472 $ 697,945 $ 107,772 $ 4,772,401 The following is a summary of information regarding impaired loans at December 31, 2018 and 2017: December 31, 2018 2017 Performing TDRs (these are not included in non-performing loans ("NPLs")) $ 8,475 $ 12,081 Non-performing TDRs (these are included in NPLs) 1,002 698 Total TDRs (these are included in impaired loans) 9,477 12,779 Impaired loans that are not TDRs 6,223 7,566 Total impaired loans $ 15,700 $ 20,345 Troubled Debt Restructurings: In certain circumstances it may be beneficial to modify or restructure the terms of a loan (i.e. troubled debt restructure or “TDR”) and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in an unfavorable real estate market. When the Company modifies the terms of a loan, it usually either reduces the monthly payment and/or interest rate for generally twelve to twenty-four months. The Company has not forgiven any material principal amounts on any loan modifications to date. The Company has $9,477 of TDRs. Of this amount $8,475 are performing pursuant to their modified terms, and $1,002 are not performing and have been placed on non-accrual status and included in our non-performing loans (“NPLs”). TDRs as of December 31, 2018 and 2017 quantified by loan type classified separately as accrual (performing loans) and non-accrual (non-performing loans) are presented in the table below. As of December 31, 2018 Accruing Non-Accrual Total Real estate loans: Residential $ 5,848 $ 386 $ 6,234 Commercial 1,837 566 2,403 Land, development, construction 77 41 118 Total real estate loans 7,762 993 8,755 Commercial 577 — 577 Consumer and other 136 9 145 Total TDRs $ 8,475 $ 1,002 $ 9,477 As of December 31, 2017 Accruing Non-Accrual Total Real estate loans: Residential $ 7,737 $ 364 $ 8,101 Commercial 3,286 306 3,592 Land, development, construction 332 — 332 Total real estate loans 11,355 670 12,025 Commercial 556 — 556 Consumer and other 170 28 198 Total TDRs $ 12,081 $ 698 $ 12,779 The Company’s policy is to return non-accrual TDR loans to accrual status when all the principal and interest amounts contractually due, pursuant to its modified terms, are brought current and future payments are reasonably assured. The Company’s policy also considers the payment history of the borrower, but is not dependent upon a specific number of payments. The Company recorded a provision for loan loss expense of $77, $265 and $454 and partial charge offs of $44, $72 and $209 on TDR loans during the periods ending December 31, 2018, 2017 and 2016, respectively. Loans are modified to minimize loan losses when management believes the modification will improve the borrower’s financial condition and ability to repay the loan. The Company typically does not forgive principal. The Company generally either reduces interest rates or decreases monthly payments for a temporary period of time and those reductions of cash flows are capitalized into the loan balance. The Company may also extend maturities, convert balloon loans to longer term amortizing loans, or vice versa, or change interest rates between variable and fixed rate. Each borrower and situation is unique and management tries to accommodate the borrower and minimize the Company’s potential losses. Approximately 89% of the Company’s TDRs are current pursuant to their modified terms, and $1,002, or approximately 11% of the Company’s total TDRs are not performing pursuant to their modified terms. There does not appear to be any significant difference in success rates with one type of concession versus another. Loans modified as TDRs during the twelve month periods ending December 31, 2018, 2017 and 2016 were $1,830, $2,258 and $4,079. The Company recorded a loan loss provision of $9, $14 and $229 for loans modified during the twelve-month periods ending December 31, 2018, 2017 and 2016. The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the years ending December 31, 2018, 2017 and 2016. Period Ending Period Ending Period Ending December 31, 2018 December 31, 2017 December 31, 2016 Number Recorded Number Recorded Number Recorded of loans investment of loans investment of loans investment Residential — $ — — $ — 2 $ 167 Commercial real estate 1 433 1 177 2 936 Land, development, construction 1 49 — — — — Commercial and Industrial — — — — — — Consumer and other — — — — — — Total 2 $ 482 1 $ 177 4 $ 1,103 The Company recorded no provision for loan loss expense or partial charge offs during the year ending December 31, 2018 on TDR loans that subsequently defaulted as described above. The Company recorded $8 and $76 in provision for loan loss expense and $8 and $77 in partial charge offs during the years ending December 31, 2017 and 2016, respectively, on TDR loans that subsequently defaulted as described above. The Company has allocated $334 and $601 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2018 and 2017. The Company has not committed to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings. The following tables present loans individually evaluated for impairment by class of loans as of December 31, 2018 and 2017 excluding purchased credit-impaired loans accounted for pursuant to ASC Topic 310-30. The recorded investment is less than the unpaid principal balance primarily due to partial charge-offs. As of December 31, 2018 Unpaid principal balance Recorded investment Allowance for loan losses allocated With no related allowance recorded: Residential real estate $ 3,608 $ 3,485 $ — Commercial real estate 6,447 5,906 — Land, development, construction 144 117 — Commercial and industrial 364 353 — Consumer, other 109 108 — With an allowance recorded: Residential real estate 2,897 2,749 331 Commercial real estate 1,593 1,590 250 Land, development, construction — — — Commercial and industrial 1,378 1,355 1,034 Consumer, other 53 37 1 Total $ 16,593 $ 15,700 $ 1,616 As of December 31, 2017 Unpaid principal balance Recorded investment Allowance for loan losses allocated With no related allowance recorded: Residential real estate $ 4,945 $ 4,818 $ — Commercial real estate 8,973 8,218 — Land, development, construction 260 210 — Commercial and industrial 3,374 2,968 — Consumer, other 142 127 — With an allowance recorded: Residential real estate 3,426 3,283 586 Commercial real estate — — — Land, development, construction 140 121 4 Commercial and industrial 531 529 206 Consumer, other 78 71 8 Total $ 21,869 $ 20,345 $ 804 December 31, 2018 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 7,492 $ 308 $ — Commercial 7,876 104 — Land, development, construction 588 8 — Total real estate loans 15,956 420 — Commercial and industrial 2,081 $ 33 — Consumer and other loans 174 8 — Total $ 18,211 $ 461 $ — December 31, 2017 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 7,731 $ 267 $ — Commercial 8,956 145 — Land, development, construction 432 18 — Total real estate loans 17,119 430 — Commercial and industrial 1,968 29 — Consumer and other loans 240 10 — Total $ 19,327 $ 469 $ — December 31, 2016 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 8,384 $ 257 $ — Commercial 11,696 131 — Land, development, construction 1,503 24 — Total real estate loans 21,583 412 — Commercial and industrial 1,808 44 — Consumer and other loans 253 11 — Total $ 23,644 $ 467 $ — The following tables present the recorded investment in non-accrual loans and loans past due over 90 days still on accrual by class of loans as of December 31, 2018 and 2017 excluding purchased credit-impaired loans accounted for pursuant to ASC Topic 310-30: As of December 31, 2018 Non-accrual Loans past due over 90 days still accruing Residential real estate $ 11,488 $ — Commercial real estate 8,445 — Land, development, construction 795 — Commercial 2,274 — Consumer, other 565 — Total $ 23,567 $ — As of December 31, 2017 Non-accrual Loans past due over 90 days still accruing Residential real estate $ 7,107 $ — Commercial real estate 6,549 — Land, development, construction 138 — Commercial 3,121 — Consumer, other 373 — Total $ 17,288 $ — The following tables present the aging of the recorded investment in past due loans as of December 31, 2018 and 2017, excluding purchased credit-impaired loans accounted for pursuant to ASC Topic 310-30: Accruing Loans Total 30 - 59 days past due 60 - 89 days past due Greater than 90 days past due Total Past Due Loans Not Past Due Non-accrual Loans As of December 31, 2018 Residential real estate $ 1,702,114 $ 5,730 $ 5,631 $ — $ 11,360 $ 1,679,266 $ 11,488 Commercial real estate 4,454,098 10,840 4,607 — 15,446 4,430,207 8,445 Land/dev/construction 635,562 661 4,022 — 4,683 630,084 795 Commercial 1,183,380 2,803 878 — 3,681 1,177,425 2,274 Consumer 203,686 1,061 271 — 1,332 201,789 565 $ 8,178,840 $ 21,094 $ 15,408 $ — $ 36,502 $ 8,118,771 $ 23,567 Accruing Loans Total 30 - 59 days past due 60 - 89 days past due Greater than 90 days past due Total Past Due Loans Not Past Due Non-accrual Loans As of December 31, 2017 Residential real estate $ 1,025,303 $ 3,568 $ 1,821 $ — $ 5,389 $ 1,012,807 $ 7,107 Commercial real estate 2,546,143 1,158 2,272 — 3,430 2,536,164 6,549 Land/dev/construction 235,816 2,807 189 — 2,996 232,682 138 Commercial 693,501 568 763 — 1,331 689,049 3,121 Consumer 107,480 471 48 — 519 106,588 373 $ 4,608,243 $ 8,572 $ 5,093 $ — $ 13,665 $ 4,577,290 $ 17,288 Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on at least an annual basis. The Company uses the following definitions for risk ratings: Special Mention: Loans classified as special mention 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 or of the institution’s credit position at some future date. Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. As of December 31, 201 8 and 2017 , and based on the most recent analysis performed, the risk category of loans by class of loans, excluding purchased credit - impaired loans accounted for pursuant to ASC Topic 310-30, is presented below. The increase in loans categorized as special mention between the periods presented is due to the acquisitions of Sunshine and Harbor on January 1, 2018 and Charter on September 1 , 201 8 , respectively. As of December 31, 2018 Loan Category Pass Special Mention Substandard Doubtful Residential real estate $ 1,633,810 $ 41,522 $ 26,782 $ — Commercial real estate 4,246,687 160,981 46,430 — Land/dev/construction 610,631 20,586 4,345 — Commercial 1,137,272 40,836 5,272 — Consumer 202,701 247 738 — Total $ 7,831,100 $ 264,172 $ 83,568 $ — As of December 31, 2017 Loan Category Pass Special Mention Substandard Doubtful Residential real estate $ 987,472 $ 20,435 $ 17,396 $ — Commercial real estate 2,411,085 115,942 19,116 — Land/dev/construction 217,555 17,699 562 — Commercial 674,764 14,186 4,551 — Consumer 106,735 139 606 — Total $ 4,397,611 $ 168,401 $ 42,231 $ — The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans, excluding purchased credit-impaired loans accounted for pursuant to ASC Topic 310-30, based on payment activity as of December 31, 2018 and 2017: As of December 31, 2018 Residential Consumer Performing 1,690,626 203,121 Non-performing 11,488 565 Total 1,702,114 203,686 As of December 31, 2017 Residential Consumer Performing $ 1,018,196 $ 107,107 Non-performing 7,107 373 Total $ 1,025,303 $ 107,480 Purchased Credit - Impaired (“PCI”) Loans: Income is recognized on PCI loans pursuant to ASC Topic 310-30. A portion of the fair value discount has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans. The remaining non-accretable difference represents cash flows not expected to be collected. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the loans as of December 31, 2018, 2017 and 2016. Contractually required principal and interest payments have been adjusted for estimated prepayments. December 31, 2018 2017 2016 Contractually required principal and interest $ 267,815 $ 248,283 $ 297,821 Non-accretable difference (38,602 ) (13,183 ) (18,372 ) Cash flows expected to be collected 229,213 235,100 279,449 Accretable yield (70,242 ) (70,942 ) (93,525 ) Carrying value of acquired loans 158,971 164,158 185,924 Allowance for loan losses (191 ) (295 ) (472 ) Carrying value less allowance for loan losses $ 158,780 $ 163,863 $ 185,452 The Company recorded $(169), $(243) and $417 in loan loss provision (recovery) expense on PCI loans during the years ending December 31, 2018, 2017 and 2016, respectively. The Company adjusted its estimates of future expected losses, cash flows and renewal assumptions during the current year. These adjustments resulted in an increase in expected cash flows and accretable yield, and a decrease in the non-accretable difference. The Company reclassified approximately $22,469, $4,707 and $6,220 from non-accretable difference to accretable yield during the twelve-month periods ending December 31, 2018, 2017 and 2016, respectively, to reflect the adjusted estimates of future expected cash flows. The Company recognized approximately $35,944 of accretion income during the twelve-month period ending December 31, 2018. The table below summarizes the changes in total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the loans during the periods ending December 31, 2018, 2017 and 2016. Effect of income all other December 31, 2017 acquisitions accretion adjustments December 31, 2018 Contractually required principal and interest $ 248,283 $ 122,392 $ — $ (102,860 ) $ 267,815 Non-accretable difference (13,183 ) (58,927 ) — 33,508 (38,602 ) Cash flows expected to be collected 235,100 63,465 — (69,352 ) 229,213 Accretable yield (70,942 ) (7,770 ) 35,944 (27,474 ) (70,242 ) Carry value of acquired loans $ 164,158 $ 55,695 $ 35,944 $ (96,826 ) $ 158,971 Effect of income all other December 31, 2016 acquisitions accretion adjustments December 31, 2017 Contractually required principal and interest $ 297,821 $ 31,334 $ — $ (80,872 ) $ 248,283 Non-accretable difference (18,372 ) (7,104 ) — 12,293 (13,183 ) Cash flows expected to be collected 279,449 24,230 — (68,579 ) 235,100 Accretable yield (93,525 ) (4,185 ) 32,388 (5,620 ) (70,942 ) Carry value of acquired loans $ 185,924 $ 20,045 $ 32,388 $ (74,199 ) $ 164,158 Effect of income all other December 31, 2015 acquisitions accretion adjustments December 31, 2016 Contractually required principal and interest $ 332,570 $ 73,005 $ — $ (107,754 ) $ 297,821 Non-accretable difference (19,452 ) (9,295 ) — 10,375 (18,372 ) Cash flows expected to be collected 313,118 63,710 — (97,379 ) 279,449 Accretable yield (102,590 ) (18,585 ) 34,006 (6,356 ) (93,525 ) Carry value of acquired loans $ 210,528 $ 45,125 $ 34,006 $ (103,735 ) $ 185,924 |