Loans | (4) Loans A summary of net loans held for investment by loan type at the dates indicated is as follows: September 30, December 31, 2018 2017 (In thousands) Commercial and residential real estate $ 2,074,512 $ 1,977,431 Construction 125,305 99,965 Commercial 558,181 523,355 Agricultural 14,987 16,995 Consumer 114,320 143,066 SBA 41,073 44,121 Other 330 866 Total gross loans 2,928,708 2,805,799 Deferred costs and (fees) 707 (136) Loans, held for investment, net 2,929,415 2,805,663 Less allowance for loan losses (23,750) (23,250) Net loans, held for investment $ 2,905,665 $ 2,782,413 In the first nine months of 2018, the Company purchased $6,465,000 of performing loans included in commercial and residential real estate and commercial loan portfolio segments. During 2017, excluding the Castle Rock transaction, the Company purchased $98,940,000 in performing loans included in commercial and residential real estate, commercial and consumer loan portfolio segments. The Company recognized a $271,000 gain on the sale of its $2.0 million credit card loan portfolio during the first quarter 2017. Activity in the allowance for loan losses for the period indicated is as follows: Three Months Ended September 30, Nine Months Ended September 30, 2018 2017 2018 2017 (In thousands) Balance, beginning of period $ 23,750 $ 23,125 $ 23,250 $ 23,250 Provision for loan losses 206 497 924 708 Loans charged-off (245) (970) (838) (1,433) Recoveries on loans previously charged-off 39 248 414 375 Balance, end of period $ 23,750 $ 22,900 $ 23,750 $ 22,900 The Company’s additional disclosures relating to loans and the allowance for loan losses are broken out into two subsets, portfolio segment and class. The portfolio segment level is defined as the level where financing receivables are aggregated in developing the Company’s systematic method for calculating its allowance for loan losses. The class level is the second level at which credit information is presented and represents the categorization of financing related receivables at a slightly less aggregated level than the portfolio segment level. Because d ata presented according to class is dependent upon the underlying purpose of the loan, whereas loan data organized by portfolio segment is determined by the loan’s underlying collateral, disclosures broken out by portfolio segment versus class may not be in agreement. The disclosures in this footnote include both Non-PCI and PCI loans. As of September 30 , 2018, PCI loans acquired in the Castle Rock and Home State transactions are not considered material and as a result separate PCI disclosures are not included. The following tables provide detail for the ending balances in the Company’s allowance for loan losses and loans held for investment, broken down by portfolio segment as of the dates indicated. In addition, the tables also provide a roll-forward by portfolio segment of the allowance for loan losses for the three and nine months ended September 30, 2018 and September 30, 2017 . The detail provided for the amount of the allowance for loan losses and loans individually versus collectively evaluated for impairment (i.e., the specific component versus the general component of the allowance for loan losses) corresponds to the Company’s systematic methodology for estimating its allowance for loan losses. Real Estate Consumer and Installment Commercial and Other Total (In thousands) Allowance for Loan Losses Balance as of January 1, 2018 $ 18,545 $ 310 $ 4,395 $ 23,250 Charge-offs (9) (424) (405) (838) Recoveries 330 16 68 414 Provision (credit) (949) 327 1,546 924 Balance as of September 30, 2018 $ 17,917 $ 229 $ 5,604 $ 23,750 Balance as of July 1, 2018 $ 18,058 $ 212 $ 5,480 $ 23,750 Charge-offs (8) (126) (111) (245) Recoveries 14 9 16 39 Provision (credit) (147) 134 219 206 Balance as of September 30, 2018 $ 17,917 $ 229 $ 5,604 $ 23,750 Balances at September 30, 2018: Allowance for Loan Losses Individually evaluated $ - $ - $ 2,351 $ 2,351 Collectively evaluated 17,917 229 3,253 21,399 Total $ 17,917 $ 229 $ 5,604 $ 23,750 Loans Individually evaluated $ 8,886 $ - $ 12,170 $ 21,056 Collectively evaluated 2,341,297 54,860 512,202 2,908,359 Total $ 2,350,183 $ 54,860 $ 524,372 $ 2,929,415 Real Estate Consumer and Installment Commercial and Other Total (In thousands) Allowance for Loan Losses Balance as of January 1, 2017 $ 20,082 $ 105 $ 3,063 $ 23,250 Charge-offs (383) (92) (958) (1,433) Recoveries 86 11 278 375 Provision (credit) (915) 159 1,464 708 Balance as of September 30, 2017 $ 18,870 $ 183 $ 3,847 $ 22,900 Balance as of July 1, 2017 $ 19,400 $ 193 $ 3,532 $ 23,125 Charge-offs (250) (75) (645) (970) Recoveries 21 4 223 248 Provision (credit) (301) 61 737 497 Balance as of September 30, 2017 $ 18,870 $ 183 $ 3,847 $ 22,900 Balances at December 31, 2017: Allowance for Loan Losses Individually evaluated $ 1 $ - $ 1,121 $ 1,122 Collectively evaluated 18,544 310 3,274 22,128 Total $ 18,545 $ 310 $ 4,395 $ 23,250 Loans Individually evaluated $ 11,256 $ 1 $ 12,363 $ 23,620 Collectively evaluated 2,225,944 74,675 481,424 2,782,043 Total $ 2,237,200 $ 74,676 $ 493,787 $ 2,805,663 The following tables provide additional detail with respect to impaired loans broken out according to class as of the dates indicated. The recorded investment included in the following table represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred costs and fees. The unpaid balance represents the recorded balance prior to any partial charge-offs. Interest income recognized year-to-date may exclude an immaterial amount of interest income on matured loans that are 90 days or more past due, but that are in the process of being renewed and thus are still accruing. September 30, 2018 Recorded Investment Unpaid Balance Related Allowance Average Recorded Investment YTD Interest Income Recognized YTD (In thousands) Impaired loans with no related allowance: Commercial and residential real estate $ 7,791 $ 8,330 $ - $ 8,871 $ 270 Construction - - - - - Commercial 6,728 7,254 - 3,987 309 Consumer 72 86 - 214 5 Other 1,921 2,503 - 2,153 49 Total $ 16,512 $ 18,173 $ - $ 15,225 $ 633 Impaired loans with a related allowance: Commercial and residential real estate $ 24 $ 24 $ - $ 35 $ 1 Construction - - - - - Commercial 4,399 4,528 2,351 7,085 37 Consumer 121 131 - 137 3 Other - - - - - Total $ 4,544 $ 4,683 $ 2,351 $ 7,257 $ 41 Total impaired loans: Commercial and residential real estate $ 7,815 $ 8,354 $ - $ 8,906 $ 271 Construction - - - - - Commercial 11,127 11,782 2,351 11,072 346 Consumer 193 217 - 351 8 Other 1,921 2,503 - 2,153 49 Total impaired loans $ 21,056 $ 22,856 $ 2,351 $ 22,482 $ 674 December 31, 2017 Recorded Investment Unpaid Balance Related Allowance Average Recorded Investment YTD Interest Income Recognized YTD (In thousands) Impaired loans with no related allowance: Commercial and residential real estate $ 9,981 $ 10,705 $ - $ 16,166 $ 2,052 Construction - - - - - Commercial 1,006 1,553 - 886 195 Consumer 367 425 - 88 - Other 2,233 2,838 - 1,066 62 Total $ 13,587 $ 15,521 $ - $ 18,206 $ 2,309 Impaired loans with a related allowance: Commercial and residential real estate $ 46 $ 157 $ 1 $ 779 $ - Construction - - - - - Commercial 9,807 9,899 1,120 5,262 447 Consumer 180 214 1 329 18 Other - - - 635 6 Total $ 10,033 $ 10,270 $ 1,122 $ 7,005 $ 471 Total impaired loans: Commercial and residential real estate $ 10,027 $ 10,862 $ 1 $ 16,945 $ 2,052 Construction - - - - - Commercial 10,813 11,452 1,120 6,148 642 Consumer 547 639 1 417 18 Other 2,233 2,838 - 1,701 68 Total impaired loans $ 23,620 $ 25,791 $ 1,122 $ 25,211 $ 2,780 The following tables summarize, by class, loans classified as past due in excess of 30 days or more, in addition to those loans classified as nonaccrual: September 30, 2018 30-89 Days Past Due 90 Days + Past Due and Still Accruing 90 Days + Past Due and Nonaccrual Total Nonaccrual and Past Due Total Loans, Held for Investment (In thousands) Commercial and residential real estate $ 7 $ - $ 304 $ 311 $ 2,075,012 Construction - - - - 125,335 Commercial 686 - 3,657 4,343 558,316 Consumer 1,523 - 83 1,606 114,348 Other 716 - 986 1,702 56,404 Total $ 2,932 $ - $ 5,030 $ 7,962 $ 2,929,415 December 31, 2017 30-89 Days Past Due 90 Days + Past Due and Still Accruing 90 Days + Past Due and Nonaccrual Total Nonaccrual and Past Due Total Loans, Held for Investment (In thousands) Commercial and residential real estate $ 410 $ - $ 1,750 $ 2,160 $ 1,977,335 Construction - - - - 99,960 Commercial 1,663 - 2,079 3,742 523,330 Consumer 469 - 444 913 143,059 Other 327 - 1,281 1,608 61,979 Total $ 2,869 $ - $ 5,554 $ 8,423 $ 2,805,663 The gross year-to-date interest income that would have been recorded had the nonaccrual loans been current in accordance with their original terms was $232,000 for the nine months ended September 30 , 2018 and $ 173,000 for the nine months ended September 30, 2017 . The gross quarter-to-date interest income that would have been recorded had the nonaccrual loans been current in accordance with their original terms was $85,000 for the third quarter 2018 and $24,000 for the third quarter 2017 . The Company categorizes loans into risk categories based on relevant information about the ability of a particular borrower to service its debt, such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance: Substandard . Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral, if any, pledged to secure the loan. Loans so classified have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the distinct possibility that the Company 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 are considered to be non-classified loans. The following tables provide detail for the risk categories of loans, by class of loans, based on the most recent credit analysis performed as of the dates indicated: September 30, 2018 Commercial & Residential Real Estate Construction Commercial Consumer Other Total (In thousands) Non-classified $ 2,065,796 $ 125,305 $ 547,729 $ 114,145 $ 52,870 $ 2,905,845 Substandard 8,716 - 10,452 175 3,520 22,863 Doubtful - - - - - - Subtotal 2,074,512 125,305 558,181 114,320 56,390 2,928,708 Deferred costs and (fees) 500 30 135 28 14 707 Loans, held for investment, net $ 2,075,012 $ 125,335 $ 558,316 $ 114,348 $ 56,404 $ 2,929,415 December 31, 2017 Commercial & Residential Real Estate Construction Commercial Consumer Other Total (In thousands) Non-classified $ 1,964,934 $ 99,965 $ 513,563 $ 142,512 $ 57,256 $ 2,778,230 Substandard 12,497 - 9,792 554 4,726 27,569 Doubtful - - - - - - Subtotal 1,977,431 99,965 523,355 143,066 61,982 2,805,799 Deferred (fees) and costs (96) (5) (25) (7) (3) (136) Loans, held for investment, net $ 1,977,335 $ 99,960 $ 523,330 $ 143,059 $ 61,979 $ 2,805,663 The book balance of TDRs at September 30 , 2018 and December 31, 2017, was $ 16,175,000 and $ 19,256,000 , respectively. Management established approximately $7,000 and $ 53,000 in specific reserves for these loans as of September 30 , 2018 and December 31, 2017, respectively. The Company had an additional $3,027,000 and $4,181,000 committed on loans classified as TDRs at September 30 , 2018 and December 31, 2017, respectively. During the nine months ended September 30 , 2018, the terms of five loans totaling $1,064,000 , were modified in troubled debt restructurings. The modifications of the terms of the five loans included four restructurings of payment terms and one renewal of a loan with a term more favorable to the borrower than would otherwise be available based on the borrower’s financial strength. During the three months ended September 30, 2018, no loans were modified in troubled debt restructurings. During the nine months ended September 30 , 2017, the terms of 23 loans totaling $4,543,000 were modified in troubled debt restructurings. The modification of the terms of such loans included 12 restructurings of payment terms and 11 loan renewals with terms more favorable to the borrowers than would otherwise be available based on the borrower’s financial strength. During the three months ended September 30, 2017, the terms of fo ur loans totaling $475,000 , were modified in troubled debt restructurings. The modification of the terms of such loans included two restructurings of payment terms and two loan renewals with terms more favorable to the borrowers than would otherwise be available based on the borrower’s financial strength. There were no material charge-offs or provisions recorded during the three and nine months ended September 30 , 2018 or September 30 , 2017 on loans designated as TDRs. For reporting purposes, a loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. There was a single default on a TDR in the second quarter 2018 with a balance of $22,000 . During the third quarter 2018, this defaulted TDR was charged-off. There were no defaults on TDRs during the nine months ended September 30 , 2017. |