Loans | (5 ) Loans The following table sets forth information concerning the loan portfolio by collateral types as of December 31, 2019 and 2018 are: December 31, 2019 December 31, 2018 Loans excluding PCI loans Real estate loans Residential $ 2,512,544 $ 1,702,114 Commercial 6,325,108 4,454,098 Land, development and construction 999,923 635,562 Total real estate 9,837,575 6,791,774 Commercial, industrial & factored receivables 1,759,074 1,183,380 Consumer and other loans 247,307 203,686 Loans before unearned fees and deferred cost 11,843,956 8,178,840 Net unearned fees and costs 4,519 2,693 Total loans excluding PCI loans 11,848,475 8,181,533 PCI loans (note 1) Real estate loans Residential 45,795 58,804 Commercial 81,576 87,336 Land, development and construction 4,655 7,028 Total real estate 132,026 153,168 Commercial and industrial 3,342 5,594 Consumer and other loans 100 209 Total PCI loans 135,468 158,971 Total loans 11,983,943 8,340,504 Allowance for loan losses for loans that are not PCI loans (40,429 ) (39,579 ) Allowance for loan losses for PCI loans (226 ) (191 ) Total loans, net of allowance for loan losses $ 11,943,288 $ 8,300,734 n ote 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, 2019, 2018 and 2017. Real Estate Loans Residential Commercial Land, Develop., Constr. Comm., Industrial & Factored Receivables Consumer & Other Total Allowance for loan losses for loans that are not PCI loans: Twelve-month ended December 31, 2019 Beginning of the period $ 5,518 $ 22,978 $ 1,781 $ 6,414 $ 2,888 $ 39,579 Charge-offs (721 ) (567 ) (42 ) (9,545 ) (3,182 ) (14,057 ) Recoveries 710 1,057 85 1,934 571 4,357 Provision for loan losses (1,250 ) (4,916 ) 495 12,479 3,742 10,550 Balance at end of period $ 4,257 $ 18,552 $ 2,319 $ 11,282 $ 4,019 $ 40,429 Twelve-month 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-month 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 Real Estate Loans Residential Commercial Land, Develop., Constr. Comm., Industrial & Factored Receivables Consumer & Other Total Allowance for loan losses for loans that are PCI loans: Twelve-month ended December 31, 2019 Beginning of the period $ — $ — $ 177 $ — $ 14 $ 191 Charge-offs — — — — — — Recoveries — — — — — — Provision for loan losses — — — — 35 35 Balance at end of period $ — $ — $ 177 $ — $ 49 $ 226 Twelve-month 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-month 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 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, 2019 and 2018. Accrued interest receivable and unearned fees/costs are not included in the recorded investment because they are not material. Real Estate Loans Residential Commercial Land, Develop., Constr. Comm., Industrial & Factored Receivables Consumer & Other Total As of December 31, 2019 Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 588 $ 375 $ — $ 914 $ 1 $ 1,878 Collectively evaluated for impairment 3,669 18,177 2,319 10,368 4,018 38,551 Purchased credit impaired — — 177 — 49 226 Total ending allowance balance $ 4,257 $ 18,552 $ 2,496 $ 11,282 $ 4,068 $ 40,655 Loans: Individually evaluated for impairment $ 6,475 $ 11,445 $ 865 $ 7,232 $ 123 $ 26,140 Collectively evaluated for impairment 2,506,069 6,313,663 999,058 1,751,842 247,184 11,817,816 Purchased credit impaired 45,795 81,576 4,655 3,342 100 135,468 Total ending loan balances $ 2,558,339 $ 6,406,684 $ 1,004,578 $ 1,762,416 $ 247,407 $ 11,979,424 Real Estate Loans Residential Commercial Land, Develop., Constr. Comm. & Industrial Consumer & Other Total As of December 31, 2018 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 following is a summary of information regarding impaired loans at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Performing TDRs (these are not included in nonperforming loans ("NPLs")) $ 8,012 $ 8,475 Nonperforming TDRs (these are included in NPLs) 4,512 1,002 Total TDRs (these are included in impaired loans) 12,524 9,477 Impaired loans that are not TDRs 13,616 6,223 Total impaired loans $ 26,140 $ 15,700 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 $12,524 of TDRs. Of this amount $8,012 are performing pursuant to their modified terms, and $4,512 are not performing and have been placed on non-accrual status and included in our non-performing loans (“NPLs”). TDRs as of December 31, 2019 and 2018 quantified by loan type classified separately as accrual (performing loans) and non-accrual (non-performing loans) are presented in the table below. Accruing Non-Accrual Total As of December 31, 2019 Real estate loans: Residential $ 4,862 $ 1,147 $ 6,009 Commercial 1,706 — 1,706 Land, development, construction 175 — 175 Total real estate loans 6,743 1,147 7,890 Commercial and industrial 1,146 3,365 4,511 Consumer and other 123 — 123 Total TDRs $ 8,012 $ 4,512 $ 12,524 Accruing Non-Accrual Total As of December 31, 2018 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 and industrial 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. 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 $970, $77 and $265 and partial charge offs of $702, $44 and $72 on TDR loans during the periods ending December 31, 2019, 2018 and 2017, 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 64% of the Company’s TDRs are current pursuant to their modified terms, and $4,512, or approximately 36% 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, 2019, 2018 and 2017 were $5,228, $1,830, and $2,258. The Company recorded a loan loss provision of $911, $9 and $14 for loans modified during the twelve-month periods ending December 31, 2019, 2018 and 2017. 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, 2019, 2018 and 2017. Period ending Period ending Period ending December 31, 2019 December 31, 2018 December 31, 2017 Number Recorded Number Recorded Number Recorded of loans investment of loans investment of loans investment Residential — $ — — $ — — $ — Commercial real estate — — 1 433 1 177 Land, development, construction — — 1 49 — — Commercial and industrial — — — — — — Consumer and other — — — — — — Total — $ — 2 $ 482 1 $ 177 The Company recorded no provision for loan loss expense or partial charge offs during the years ending December 31, 2019 and 2018 on TDR loans that subsequently defaulted as described above. The Company recorded $8 in provision for loan loss expense and $8 in partial charge offs during the year ending December 31, 2017 on TDR loans that subsequently defaulted as described above. The Company has allocated $494 and $334 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2019 and 2018. 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, 2019 and 2018 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. Unpaid principal balance Recorded investment Allowance for loan losses allocated As of December 31, 2019 With no related allowance recorded: Residential real estate $ 2,894 $ 2,744 $ — Commercial real estate 11,031 10,015 — Land, development, construction 886 865 — Commercial and industrial 5,522 4,820 — Consumer, other 99 98 — With an allowance recorded: Residential real estate 3,920 3,731 588 Commercial real estate 1,438 1,430 375 Land, development, construction — — — Commercial and industrial 2,486 2,412 914 Consumer, other 31 25 1 Total $ 28,307 $ 26,140 $ 1,878 Unpaid principal balance Recorded investment Allowance for loan losses allocated As of December 31, 2018 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 0 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized December 31, 2019 Real estate loans: Residential $ 6,153 $ 233 $ — Commercial 9,420 102 — Land, development, construction 216 8 — Total real estate loans 15,789 343 — Commercial and industrial 5,446 59 — Consumer and other loans 126 8 — Total $ 21,361 $ 410 $ — Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized December, 31, 2018 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 $ — Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized December, 31, 2017 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 $ — 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, 2019 and 2018 excluding purchased credit-impaired loans accounted for pursuant to ASC Topic 310-30: Non-accrual Loans Past Due Over 90 Days Still Accruing As of December 31, 2019 Residential real estate $ 13,455 $ — Commercial real estate 12,141 — Land, development, construction 2,516 — Comm., industrial & factored receivables 7,884 1,692 Consumer, other 920 — Total $ 36,916 $ 1,692 Non-accrual Loans Past Due Over 90 Days Still Accruing As of December 31, 2018 Residential real estate $ 11,488 $ — Commercial real estate 8,445 — Land, development, construction 795 — Commercial and industrial 2,274 — Consumer, other 565 — Total $ 23,567 $ — The following tables present the aging of the recorded investment in past due loans as of December 31, 2019 and 2018, 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 Nonaccrual Loans As of December 31, 2019 Residential real estate $ 2,512,544 $ 7,601 $ 5,928 $ — $ 13,529 $ 2,485,560 $ 13,455 Commercial real estate 6,325,108 7,554 2,577 — 10,131 6,302,836 12,141 Land, development, construction 999,923 1,343 2,349 — 3,692 993,715 2,516 Comm., industrial & factored receivables 1,759,074 14,924 12,465 1,692 29,081 1,722,109 7,884 Consumer 247,307 1,663 907 — 2,570 243,817 920 $ 11,843,956 $ 33,085 $ 24,226 $ 1,692 $ 59,003 $ 11,748,037 $ 36,916 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, development, construction 635,562 661 4,022 — 4,683 630,084 795 Comm. & industrial 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 December 31, 2019 and 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 December 31, 2019 Loan Category Pass Special Mention Substandard Doubtful Residential real estate $ 2,455,752 $ 31,189 $ 25,603 $ — Commercial real estate 6,151,309 118,412 55,387 — Land, development, construction 989,860 6,418 3,645 — Comm., industrial & factored receivables 1,705,862 35,070 18,142 — Consumer 245,905 160 1,242 — Total $ 11,548,688 $ 191,249 $ 104,019 $ — 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, development, construction 610,631 20,586 4,345 — Comm. & industrial 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 accounted for pursuant to ASC Topic 310-30, based on payment activity as of December 31, 2019 and 2018: Residential Consumer As of December 31, 2019 Performing $ 2,499,089 $ 246,387 Nonperforming 13,455 920 Total $ 2,512,544 $ 247,307 Residential Consumer As of December 31, 2018 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 December 31, 2019, 2018 and 2017. Contractually required principal and interest payments have been adjusted for estimated prepayments. December 31, 2019 2018 2017 Contractually required principal and interest $ 244,189 $ 267,815 $ 248,283 Non-accretable difference (46,271 ) (38,602 ) (13,183 ) Cash flows expected to be collected 197,918 229,213 235,100 Accretable yield (62,450 ) (70,242 ) (70,942 ) Carrying value of acquired loans 135,468 158,971 164,158 Allowance for loan losses (226 ) (191 ) (295 ) Carrying value less allowance for loan losses $ 135,242 $ 158,780 $ 163,863 The Company recorded $35, ($169) and ($243) in loan loss provision expense (recovery) on PCI loans during the years ending December 31, 2019, 2018 and 2017, 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 $18,450, $22,469 and $4,707 from non-accretable difference to accretable yield during the twelve-month periods ending December 31, 2019, 2018 and 2017, respectively, to reflect the adjusted estimates of future expected cash flows. The Company recognized approximately $33,766 of accretion income during the twelve-month period ending December 31, 2019. 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, 2019, 2018 and 2017. Effect of Income All Other Dec. 31, 2018 Acquisitions Accretion Adjustments Dec. 31, 2019 Contractually required principal and interest $ 267,815 $ 51,527 $ — $ (75,153 ) $ 244,189 Non-accretable difference (38,602 ) (29,187 ) — 21,518 (46,271 ) Cash flows expected to be collected 229,213 22,340 — (53,635 ) 197,918 Accretable yield (70,242 ) (3,724 ) 33,766 (22,250 ) (62,450 ) Carry value of acquired loans $ 158,971 $ 18,616 $ 33,766 $ (75,885 ) $ 135,468 Effect of Income All Other Dec. 31, 2017 Acquisitions Accretion Adjustments Dec. 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 Dec. 31, 2016 Acquisitions Accretion Adjustments Dec. 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 |