Loans | NOTE 7: Loans The following table sets forth information concerning the loan portfolio by collateral types as of the dates indicated. March 31, 2019 December 31, 2018 Loans excluding PCI loans Real estate loans Residential $ 1,762,696 $ 1,702,114 Commercial 4,400,583 4,454,098 Land, development and construction 651,112 635,562 Total real estate 6,814,391 6,791,774 Commercial 1,175,966 1,183,380 Consumer and other loans 206,545 203,686 Loans before unearned fees and deferred cost 8,196,902 8,178,840 Net unearned fees and costs 3,037 2,693 Total loans excluding PCI loans 8,199,939 8,181,533 PCI loans (note 1) Real estate loans Residential 55,532 58,804 Commercial 80,792 87,336 Land, development and construction 7,261 7,028 Total real estate 143,585 153,168 Commercial 5,662 5,594 Consumer and other loans 209 209 Total PCI loans 149,456 158,971 Total loans 8,349,395 8,340,504 Allowance for loan losses for loans that are not PCI loans (39,861 ) (39,579 ) Allowance for loan losses for PCI loans (191 ) (191 ) Total loans, net of allowance for loan losses $ 8,309,343 $ 8,300,734 Note 1: Purchased credit impaired (“PCI”) loans are being accounted for pursuant to ASC Topic 310-30. The table below set forth the activity in the allowance for loan losses for the periods presented. Allowance for loan losses for loans that are not PCI loans Allowance for loan losses on PCI loans Total Three months ended March 31, 2019 Balance at beginning of period $ 39,579 $ 191 $ 39,770 Loans charged-off (1,447 ) — (1,447 ) Recoveries of loans previously charged-off 676 — 676 Net charge-offs (771 ) — (771 ) Provision for loan losses 1,053 — 1,053 Balance at end of period $ 39,861 $ 191 $ 40,052 Three months ended March 31, 2018 Balance at beginning of period $ 32,530 $ 295 $ 32,825 Loans charged-off (403 ) — (403 ) Recoveries of loans previously charged-off 632 75 707 Net recoveries 229 75 304 Provision for loan losses 1,395 (95 ) 1,300 Balance at end of period $ 34,154 $ 275 $ 34,429 The following tables present the activity in the allowance for loan losses by portfolio segment for the periods presented. Real Estate Loans Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses for loans that are not PCI loans: Three months ended March 31, 2019 Beginning of the period $ 5,518 $ 22,978 $ 1,781 $ 6,414 $ 2,888 $ 39,579 Charge-offs (201 ) — (31 ) (664 ) (551 ) (1,447 ) Recoveries 142 152 83 155 144 676 Provision for loan losses (11 ) (883 ) 387 1,025 535 1,053 Balance at end of period $ 5,448 $ 22,247 $ 2,220 $ 6,930 $ 3,016 $ 39,861 Three months ended March 31, 2018 Beginning of the period $ 6,003 $ 19,304 $ 1,179 $ 4,130 $ 1,914 $ 32,530 Charge-offs (136 ) — — (7 ) (260 ) (403 ) Recoveries 274 94 — 6 258 632 Provision for loan losses (394 ) 1,577 115 372 (275 ) 1,395 Balance at end of period $ 5,747 $ 20,975 $ 1,294 $ 4,501 $ 1,637 $ 34,154 Real Estate Loans Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses for loans that are PCI loans: Three months ended March 31, 2019 Beginning of the period $ — $ — $ 177 $ — $ 14 $ 191 Charge-offs — — — — — — Recoveries — — — — — — Provision for loan losses — — — — — — Balance at end of period $ — $ — $ 177 $ — $ 14 $ 191 Three months ended March 31, 2018 Beginning of the period $ — $ 59 $ 222 $ — $ 14 $ 295 Charge-offs — — — — — — Recoveries — — 75 — — 75 Provision for loan losses — — (95 ) — — (95 ) Balance at end of period $ — $ 59 $ 202 $ — $ 14 $ 275 The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2019 and December 31, 2018. Accrued interest receivable and unearned loan fees and costs are not included in the recorded investment because they are not material. Real Estate Loans As of March 31, 2019 Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 324 $ 761 $ — $ 1,389 $ 1 $ 2,475 Collectively evaluated for impairment 5,124 21,486 2,220 5,541 3,015 37,386 Purchased credit impaired — — 177 — 14 191 Total ending allowance balance $ 5,448 $ 22,247 $ 2,397 $ 6,930 $ 3,030 $ 40,052 Loans: Individually evaluated for impairment $ 5,657 $ 8,078 $ 116 $ 3,492 $ 134 $ 17,477 Collectively evaluated for impairment 1,757,039 4,392,505 650,996 1,172,474 206,411 8,179,425 Purchased credit impaired 55,532 80,792 7,261 5,662 209 149,456 Total ending loan balances $ 1,818,228 $ 4,481,375 $ 658,373 $ 1,181,628 $ 206,754 $ 8,346,358 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 The table below summarizes impaired loan data for the periods presented. Mar. 31, 2019 Dec. 31, 2018 Performing TDRs (these are not included in nonperforming loans ("NPLs")) $ 8,801 $ 8,475 Nonperforming TDRs (these are included in NPLs) 1,092 1,002 Total TDRs (these are included in impaired loans) 9,893 9,477 Impaired loans that are not TDRs 7,584 6,223 Total impaired loans $ 17,477 $ 15,700 Troubled Debt Restructurings: In certain situations, it is common to restructure or modify the terms of troubled loans (i.e. troubled debt restructure or “TDRs”). In those circumstances, it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in a distressed sale. When the terms of a loan have been modified, usually the monthly payment and/or interest rate is reduced for generally twelve to twenty-four months. The Company has not forgiven any material principal amounts on any loan modifications to date. TDRs as of March 31, 2019 and December 31, 2018 quantified by loan type classified separately as accrual (performing loans) and non-accrual (non-performing loans) are presented in the tables below. As of March 31, 2019 Accruing Non-Accrual Total Real estate loans: Residential $ 5,507 $ 489 $ 5,996 Commercial 1,823 563 2,386 Land, development, construction 76 40 116 Total real estate loans 7,406 1,092 8,498 Commercial 1,261 — 1,261 Consumer and other 134 — 134 Total TDRs $ 8,801 $ 1,092 $ 9,893 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 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. Our 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 $31 and partial charge offs of $8 on the TDR loans described above during the three-month period ending March 31, 2019. The Company recorded a provision Loans are modified to minimize loan losses when we believe the modification will improve the borrower’s financial condition and ability to repay the loan. We typically do not forgive principal. We generally either reduce interest rates or decrease monthly payments for a temporary period of time and those reductions of cash flows are capitalized into the loan balance. We 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 we try to accommodate the borrower and minimize the Company’s potential losses. Approximately 89% of our TDRs are current pursuant to their modified terms, and $1,092, or approximately 11% of our 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. One loan with a balance of $713 was modified as a TDR during the three-month period ending March 31, 2019. No loan loss provision was recorded during the three-month period ending March 31, 2019. Loans modified as TDRs during the three-month period ending March 31, 2018 were $1,563. The Company recorded no loan loss provision for loans modified during the three-month period ending March 31, 2018. The following table presents loans by class modified and for which there was a payment default within twelve months following the modification during the periods ending March 31, 2019 and 2018. Period ending Period ending March 31, 2019 March 31, 2018 Number Recorded Number Recorded of loans investment of loans investment Residential — $ — — $ — Commercial real estate — — 1 174 Land, development, construction — — — — Commercial and Industrial 1 122 — — Consumer and other — — — — Total 1 $ 122 1 $ 174 The Company recorded no provision for loan loss expense and no partial charge offs on TDR loans subsequently defaulted during the three-month period ending March 31, 2019. The Company recorded a provision for loan loss expense of $2 and partial charge offs of $2 on TDR loans that subsequently defaulted as described above during the three-month period ending March 31, 2018. The following tables present loans individually evaluated for impairment by class of loans as of March 31, 2019 and December 31, 2018, excluding purchased credit impaired loans accounted for pursuant to ASC Topic 310-30. The recorded investment is less than the unpaid principal balance due to partial charge-offs. As of March 31, 2019 Unpaid principal balance Recorded investment Allowance for loan losses allocated With no related allowance recorded: Residential real estate $ 3,030 $ 2,973 $ — Commercial real estate 5,469 4,799 — Land, development, construction 143 116 — Commercial and industrial 1,056 1,045 — Consumer, other 108 107 — With an allowance recorded: Residential real estate 2,859 2,684 324 Commercial real estate 3,423 3,279 761 Land, development, construction — — — Commercial and industrial 2,481 2,447 1,389 Consumer, other 32 27 1 Total $ 18,601 $ 17,477 $ 2,475 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 Three months ended March 31, 2019 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 5,945 $ 62 $ — Commercial 7,787 25 — Land, development, construction 117 1 — Total real estate loans 13,849 88 — Commercial and industrial 2,600 12 — Consumer and other loans 140 2 — Total $ 16,589 $ 102 $ — Three months ended March 31, 2018 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 8,133 $ 77 $ — Commercial 8,264 12 — Land, development, construction 264 3 — Total real estate loans 16,661 92 — Commercial and industrial 3,025 6 — Consumer and other loans 195 2 — Total $ 19,881 $ 100 $ — Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans, excluding purchased credit impaired loans accounted for pursuant to ASC Topic 310-30. Nonperforming loans were as follows: Mar. 31, 2019 Dec. 31, 2018 Non-accrual loans $ 35,181 $ 23,567 Loans past due over 90 days and still accruing interest — — Total non-performing loans $ 35,181 $ 23,567 The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of March 31, 2019 and December 31, 2018, excluding purchased credit impaired loans: As of March 31, 2019 Nonaccrual Loans past due over 90 days still accruing Residential real estate $ 12,888 $ — Commercial real estate 10,259 — Land, development, construction 6,965 — Commercial 4,425 — Consumer, other 644 — Total $ 35,181 $ — As of December 31, 2018 Nonaccrual 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 $ — The following table presents the aging of the recorded investment in past due loans as of March 31, 2019 and December 31, 2018, excluding purchased credit impaired loans: 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 Nonaccrual Loans As of March 31, 2019 Residential real estate $ 1,762,696 $ 10,610 $ 3,172 $ — $ 13,782 $ 1,736,026 $ 12,888 Commercial real estate 4,400,583 7,012 4,856 — 11,868 4,378,456 10,259 Land/dev/construction 651,112 4,036 79 — 4,115 640,032 6,965 Commercial 1,175,966 3,532 368 — 3,900 1,167,641 4,425 Consumer 206,545 709 261 — 970 204,931 644 $ 8,196,902 $ 25,899 $ 8,736 $ — $ 34,635 $ 8,127,086 $ 35,181 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 Nonaccrual 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 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 March 31, 2019 and December 31, 2018 , 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. As of March 31, 2019 Loan Category Pass Special Mention Substandard Doubtful Residential real estate $ 1,696,127 $ 38,771 $ 27,798 $ — Commercial real estate 4,210,370 144,831 45,382 — Land/dev/construction 632,862 14,109 4,141 — Commercial 1,127,102 41,986 6,878 — Consumer 205,470 224 851 — Total $ 7,871,931 $ 239,921 $ 85,050 $ — 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 $ — 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, based on payment activity as of March 31, 2019 and December 31, 2018: As of March 31, 2019 Residential Consumer Performing $ 1,749,808 $ 205,901 Nonperforming 12,888 644 Total $ 1,762,696 $ 206,545 As of December 31, 2018 Residential Consumer Performing $ 1,690,626 $ 203,121 Nonperforming 11,488 565 Total $ 1,702,114 $ 203,686 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 March 31, 2019 and December 31, 2018. Contractually required principal and interest payments have been adjusted for estimated prepayments. Mar. 31, 2019 Dec. 31, 2018 Contractually required principal and interest $ 248,243 $ 267,815 Non-accretable difference (28,865 ) (38,602 ) Cash flows expected to be collected 219,378 229,213 Accretable yield (69,922 ) (70,242 ) Carrying value of acquired loans 149,456 158,971 Allowance for loan losses (191 ) (191 ) Carrying value less allowance for loan losses $ 149,265 $ 158,780 total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the loans during the three - month periods ending March 31, 2019 and 2018 . Activity during the Effect of income all other three-month period ending March 31, 2019 Dec. 31, 2018 acquisitions accretion adjustments Mar. 31, 2019 Contractually required principal and interest $ 267,815 $ — $ — $ (19,572 ) $ 248,243 Non-accretable difference (38,602 ) — — 9,737 (28,865 ) Cash flows expected to be collected 229,213 — — (9,835 ) 219,378 Accretable yield (70,242 ) — 10,140 (9,820 ) (69,922 ) Carry value of acquired loans $ 158,971 $ — $ 10,140 $ (19,655 ) $ 149,456 Activity during the Effect of income all other three-month period ending March 31, 2018 Dec. 31, 2017 acquisitions accretion adjustments Mar. 31, 2018 Contractually required principal and interest $ 248,283 $ 88,705 $ — $ (21,711 ) $ 315,277 Non-accretable difference (13,183 ) (38,164 ) — 1,110 (50,237 ) Cash flows expected to be collected 235,100 50,541 — (20,601 ) 265,040 Accretable yield (70,942 ) (6,278 ) 7,718 (2,355 ) (71,857 ) Carry value of acquired loans $ 164,158 $ 44,263 $ 7,718 $ (22,956 ) $ 193,183 |