Loans and Allowance for Loan Losses | Loans and Allowance for Loan Losses Loans held for investment in the accompanying condensed consolidated balance sheets are summarized as follows: September 30, December 31, Loans held for investment: Real estate: Construction and land $ 614,974 $ 324,863 Farmland 16,633 10,528 1 - 4 family residential 559,310 297,917 Multi-family residential 306,965 51,285 Commercial real estate 2,426,641 1,103,032 Commercial 1,711,256 760,772 Mortgage warehouse 233,577 — Consumer 18,114 7,112 5,887,470 2,555,509 Deferred loan fees 134 (15 ) Allowance for loan losses (26,243 ) (19,255 ) Total loans held for investment $ 5,861,361 $ 2,536,239 Included in the net loan portfolio as of September 30, 2019 and December 31, 2018 was an accretable discount related to purchased performing and purchased credit impaired (“PCI”) loans acquired within a business combination in the approximate amounts of $61,744 and $22,309 , respectively. The discount is being accreted into income on a level-yield basis over the life of the loans. In addition, included in the net loan portfolio as of September 30, 2019 and December 31, 2018 is a discount on retained loans from sale of originated SBA loans of $2,871 and $2,398 , respectively. The majority of the Company’s loan portfolio consists of loans to businesses and individuals in the Dallas-Fort Worth metroplex and the Houston metropolitan area. This geographic concentration subjects the loan portfolio to the general economic conditions within these areas. The risks created by this concentration have been considered by management in the determination of the adequacy of the allowance for loan losses. Management believes the allowance for loan losses was adequate to cover estimated losses on loans as of September 30, 2019 and December 31, 2018 . Non-Accrual and Past Due Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Non-accrual loans aggregated by class of loans, as of September 30, 2019 and December 31, 2018 , were as follows: Non-Accrual Loans September 30, December 31, Real estate: Construction and land $ 1,850 $ 2,399 Farmland — — 1 - 4 family residential 1,188 — Multi-family residential — — Commercial real estate 2,859 2,575 Commercial 4,190 19,769 Mortgage warehouse — — Consumer 85 2 Total $ 10,172 $ 24,745 At December 31, 2018 , non-accrual loans included PCI loans of $16,902 for which discount accretion has been suspended because the extent and timing of cash flows from these PCI loans can no longer be reasonably estimated. There were no PCI loans included in non-accrual loans at September 30, 2019 . During the three and nine months ended September 30, 2019 , interest income not recognized on non-accrual loans, excluding PCI loans, was $243 and $530 , respectively. During the three and nine months ended September 30, 2018 , interest income not recognized on non-accrual loans, excluding PCI loans, was $331 and $371 , respectively. An age analysis of past due loans, aggregated by class of loans, as of September 30, 2019 and December 31, 2018 , is as follows: September 30, 2019 30 to 59 Days 60 to 89 Days 90 Days or Greater Total Past Due Total Current PCI Total Loans Total 90 Days Past Due and Still Accruing (1) Real estate: Construction and land $ 850 $ — $ 1,896 $ 2,746 $ 607,821 $ 4,407 $ 614,974 $ 47 Farmland — — — — 16,633 — 16,633 — 1 - 4 family residential 138 3,168 1,156 4,462 550,236 4,612 559,310 482 Multi-family residential — — — — 306,965 — 306,965 — Commercial real estate 4,927 23,165 1,078 29,170 2,300,288 97,183 2,426,641 398 Commercial 3,851 435 3,838 8,124 1,660,994 42,138 1,711,256 1,129 Mortgage warehouse — — — — 233,577 — 233,577 — Consumer 176 39 223 438 17,540 136 18,114 138 Total $ 9,942 $ 26,807 $ 8,191 $ 44,940 $ 5,694,054 $ 148,476 $ 5,887,470 $ 2,194 (1) Loans 90 days past due and still accruing excludes $30,294 of PCI loans as of September 30, 2019 . December 31, 2018 30 to 59 Days 60 to 89 Days 90 Days or Greater Total Past Due Total Current PCI Total Loans Total 90 Days Past Due and Still Accruing (1) Real estate: Construction and land $ 305 $ — $ — $ 305 $ 324,558 $ — $ 324,863 $ — Farmland — — — — 10,528 — 10,528 — 1 - 4 family residential 131 266 — 397 297,435 85 297,917 — Multi-family residential — — — — 51,285 — 51,285 — Commercial real estate 3,465 — — 3,465 1,082,559 17,008 1,103,032 — Commercial 816 828 — 1,644 735,391 23,737 760,772 — Consumer 10 — — 10 7,102 — 7,112 — Total $ 4,727 $ 1,094 $ — $ 5,821 $ 2,508,858 $ 40,830 $ 2,555,509 $ — (1) Loans 90 days past due and still accruing excludes $527 of PCI loans as of December 31, 2018 . Loans past due 90 days and still accruing increased to $2,194 as of September 30, 2019 . These loans are also considered well-secured, and are in the process of collection with plans in place for the borrowers to bring the notes fully current or to subsequently be renewed. The Company believes that it will collect all principal and interest due on each of the loans past due 90 days and still accruing. Impaired Loans Impaired loans are those loans for which it is probable the Company will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. All troubled debt restructurings (“TDRs”) are considered impaired loans. Impaired loans are measured based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. Substantially all of the Company’s impaired loans are measured at the fair value of the collateral. Impaired loans, or portions thereof, are charged off when deemed uncollectible. Impaired loans and TDRs at September 30, 2019 and December 31, 2018 are summarized in the following tables. September 30, 2019 (1) Unpaid Contractual Principal Balance Recorded Investment with No Allowance Recorded Investment with Allowance Total Recorded Investment Related Allowance Average Recorded Investment YTD Real estate: Construction and land $ 1,850 $ 184 $ 1,666 $ 1,850 $ 166 $ 1,989 Farmland — — — — — — 1 - 4 family residential 157 157 — 157 — 158 Multi-family residential — — — — — — Commercial real estate 2,983 2,983 — 2,983 — 3,210 Commercial 4,190 285 3,905 4,190 1,418 4,352 Consumer 59 59 — 59 — 60 Total $ 9,239 $ 3,668 $ 5,571 $ 9,239 $ 1,584 $ 9,769 (1) Loans reported exclude PCI loans. December 31, 2018 (1) Unpaid Contractual Principal Balance Recorded Investment with No Allowance Recorded Investment with Allowance Total Recorded Investment Related Allowance Average Recorded Investment YTD Real estate: Construction and land $ 2,016 $ 2,016 $ — $ 2,016 $ — $ 2,262 Farmland — — — — — — 1 - 4 family residential 542 542 — 542 — 565 Multi-family residential — — — — — — Commercial real estate 2,939 2,939 — 2,939 — 3,032 Commercial 3,228 644 2,584 3,228 368 3,351 Consumer 66 66 — 66 — 79 Total $ 8,791 $ 6,207 $ 2,584 $ 8,791 $ 368 $ 9,289 (1) Loans reported exclude PCI loans. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Troubled Debt Restructuring Modifications of terms for the Company’s loans and their inclusion as TDRs are based on individual facts and circumstances. Loan modifications that are included as TDRs may involve a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk, or deferral of principal payments, regardless of the period of the modification. The recorded investment in TDRs was $1,132 and $1,171 as of September 30, 2019 and December 31, 2018 , respectively. There were no new TDRs during the nine months ended September 30, 2019 . During the nine months ended September 30, 2018 certain loans were modified as TDRs, the terms of which are summarized in the following table. Nine months ended September 30, 2018 Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Adjusted Interest Rate Extended Maturity Extended Maturity and Restructured Payments Extended Maturity, Restructured Payments and Adjusted Interest Rate Commercial 3 628 — 612 — — Total 3 $ 628 $ — $ 612 $ — $ — There were no loans modified as TDR loans within the previous 12 months and for which there was a payment default during the three and nine months ended September 30, 2019 and 2018 . A default for purposes of this disclosure is a TDR loan in which the borrower is 90 days past due or results in the foreclosure and repossession of the applicable collateral. Interest income recorded during the three and nine months ended September 30, 2019 and 2018 on TDR loans and interest income that would have been recorded had the terms of the loans not been modified was minimal. The Company has not committed to lend additional amounts to customers with outstanding loans classified as TDRs as of September 30, 2019 or December 31, 2018 . Credit Quality Indicators From a credit risk standpoint, the Company classifies its loans in one of the following categories: (i) pass, (ii) special mention, (iii) substandard or (iv) doubtful. Loans classified as loss are charged-off. Loans not rated special mention, substandard, doubtful or loss are classified as pass loans. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on criticized credits monthly. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each monthly reporting period. All classified credits are evaluated for impairment. If impairment is determined to exist, a specific reserve is established. The Company’s methodology is structured so that specific reserves are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss). Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are generally not so pronounced that the Company expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits with a lower rating. Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses which exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed. Credits rated doubtful are those in which full collection of principal appears highly questionable, and in which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on non-accrual. Credits classified as PCI are those that, at acquisition date, had the characteristics of substandard loans and it was probable, at acquisition, that all contractually required principal and interest payments would not be collected. The Company evaluates these loans quarterly on a projected cash flow basis. The following tables summarize the Company’s internal ratings of its loans, including PCI loans, as of September 30, 2019 and December 31, 2018 : September 30, 2019 Pass Special Substandard Doubtful PCI Total Real estate: Construction and land $ 605,062 $ 2,320 $ 3,185 $ — $ 4,407 $ 614,974 Farmland 16,633 — — — — 16,633 1 - 4 family residential 551,288 1,432 1,978 — 4,612 559,310 Multi-family residential 306,965 — — — — 306,965 Commercial real estate 2,259,962 39,963 29,533 — 97,183 2,426,641 Commercial 1,601,549 51,479 16,090 — 42,138 1,711,256 Mortgage warehouse 233,577 — — — — 233,577 Consumer 17,725 37 216 — 136 18,114 Total $ 5,592,761 $ 95,231 $ 51,002 $ — $ 148,476 $ 5,887,470 December 31, 2018 Pass Special Mention Substandard Doubtful PCI Total Real estate: Construction and land $ 320,987 $ 1,860 $ 2,016 $ — $ — $ 324,863 Farmland 10,528 — — — — 10,528 1 - 4 family residential 296,870 236 726 — 85 297,917 Multi-family residential 51,285 — — — — 51,285 Commercial real estate 1,065,982 7,056 12,986 — 17,008 1,103,032 Commercial 720,583 8,900 7,552 — 23,737 760,772 Consumer 6,950 — 162 — — 7,112 Total $ 2,473,185 $ 18,052 $ 23,442 $ — $ 40,830 $ 2,555,509 An analysis of the allowance for loan losses for the nine months ended September 30, 2019 and 2018 and the year ended December 31, 2018 is as follows: Nine Months Ended September 30, 2019 Year Ended December 31, 2018 Nine Months Ended September 30, 2018 Balance at beginning of period $ 19,255 $ 12,808 $ 12,808 Provision charged to earnings 18,021 6,603 5,239 Charge-offs (11,272 ) (197 ) (171 ) Recoveries 239 41 33 Net charge-offs (11,033 ) (156 ) (138 ) Balance at end of period $ 26,243 $ 19,255 $ 17,909 The allowance for loan losses as a percentage of total loans was 0.45% , 0.75% and 0.73% as of September 30, 2019 , December 31, 2018 and September 30, 2018 , respectively. The following tables summarize the activity in the allowance for loan losses by portfolio segment for the periods indicated. Nine Months Ended September 30, 2019 Real Estate Construction, Residential Commercial Real Estate Commercial Consumer Total Balance at beginning of period $ 2,244 $ 1,975 $ 6,463 $ 8,554 $ 19 $ 19,255 Provision (recapture) charged to earnings 1,359 910 2,025 13,491 236 18,021 Charge-offs — (157 ) — (10,898 ) (217 ) (11,272 ) Recoveries — 62 — 91 86 239 Net charge-offs — (95 ) — (10,807 ) (131 ) (11,033 ) Balance at end of period $ 3,603 $ 2,790 $ 8,488 $ 11,238 $ 124 $ 26,243 Period-end amount allocated to: Specific reserves 166 — — 1,418 — 1,584 PCI reserves — — — 421 — 421 General reserves 3,437 2,790 8,488 9,399 124 24,238 Total $ 3,603 $ 2,790 $ 8,488 $ 11,238 $ 124 $ 26,243 For the Year Ended December 31, 2018 Real Estate Construction, Residential Commercial Real Estate Commercial Consumer Total Balance at beginning of period $ 1,315 $ 1,473 $ 4,410 $ 5,588 $ 22 $ 12,808 Provision (recapture) charged to earnings 929 502 2,053 3,100 19 6,603 Charge-offs — — — (175 ) (22 ) (197 ) Recoveries — — — 41 — 41 Net charge-offs (recoveries) — — — (134 ) (22 ) (156 ) Balance at end of period $ 2,244 $ 1,975 $ 6,463 $ 8,554 $ 19 $ 19,255 Period-end amount allocated to: Specific reserves — — — 368 — 368 PCI reserves — — — 1,302 — 1,302 General reserves 2,244 1,975 6,463 6,884 19 17,585 Total $ 2,244 $ 1,975 $ 6,463 $ 8,554 $ 19 $ 19,255 For the Nine Months Ended September 30, 2018 Real Estate Construction, Residential Commercial Real Estate Commercial Consumer Total Balance at beginning of year $ 1,315 $ 1,473 $ 4,410 $ 5,588 $ 22 $ 12,808 Provision (recapture) charged to earnings 552 324 1,726 2,633 4 5,239 Charge-offs — — — (150 ) (21 ) (171 ) Recoveries — — — 33 — 33 Net charge-offs (recoveries) — — — (117 ) (21 ) (138 ) Balance at end of period $ 1,867 $ 1,797 $ 6,136 $ 8,104 $ 5 $ 17,909 Period-end amount allocated to: Specific reserves — — — 378 — 378 PCI reserves — — — 1,302 — 1,302 General reserves 1,867 1,797 6,136 6,424 5 16,229 Total $ 1,867 $ 1,797 $ 6,136 $ 8,104 $ 5 $ 17,909 The Company’s recorded investment in loans as of September 30, 2019 and December 31, 2018 related to the balance in the allowance for loan losses on the basis of the Company’s impairment methodology is as follows: September 30, 2019 Real Estate Construction, Residential Commercial Real Estate Commercial Consumer Total Loans individually evaluated for impairment $ 1,850 $ 157 $ 2,983 $ 4,190 $ 59 $ 9,239 Loans collectively evaluated for impairment 625,350 861,506 2,326,475 1,898,505 17,919 5,729,755 PCI loans 4,407 4,612 97,183 42,138 136 148,476 Total $ 631,607 $ 866,275 $ 2,426,641 $ 1,944,833 $ 18,114 $ 5,887,470 December 31, 2018 Real Estate Construction, Residential Commercial Real Estate Commercial Consumer Total Loans individually evaluated for impairment $ 2,016 $ 542 $ 2,939 $ 3,228 $ 66 $ 8,791 Loans collectively evaluated for impairment 333,375 348,575 1,083,085 733,807 7,046 2,505,888 PCI loans — 85 17,008 23,737 — 40,830 Total $ 335,391 $ 349,202 $ 1,103,032 $ 760,772 $ 7,112 $ 2,555,509 Loans acquired with evidence of credit quality deterioration at acquisition, for which it was probable that the Company would not be able to collect all contractual amounts due, were accounted for as PCI loans. The carrying amount of PCI loans included in the condensed consolidated balance sheets and the related outstanding balances at September 30, 2019 and December 31, 2018 are set forth in the table below. The outstanding balance represents the total amount owed, including accrued but unpaid interest, and any amounts previously charged off. September 30, 2019 December 31, 2018 Carrying amount $ 148,055 $ 39,528 Outstanding balance 185,787 49,902 Changes in the accretable yield for PCI loans for the three and nine months ended September 30, 2019 and 2018 are included in table below. Three Months Ended Nine Months Ended September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 Balance at beginning of period $ 33,709 $ 7,335 $ 18,747 $ 2,723 Additions — — 18,073 1,459 Reclassifications (to) from nonaccretable 9,309 278 11,195 6,499 Accretion (4,149 ) (820 ) (9,146 ) (3,888 ) Balance at end of period $ 38,762 $ 6,793 $ 38,762 $ 6,793 During the three and nine months ended September 30, 2019 , the Company received cash collections in excess of expected cash flows on PCI loans accounted for individually and not aggregated into loan pools of $28 and $441 , respectively. During the three and nine months ended September 30, 2018 , the Company received cash collections in excess of expected cash flows on PCI loans accounted for individually and not aggregated into loan pools of $1,999 and $3,759 , respectively. Servicing Assets The Company was servicing loans of approximately $241,733 and $71,609 as of September 30, 2019 and 2018 , respectively. A summary of the changes in the related servicing assets are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Balance at beginning of period $ 3,793 $ 1,183 $ 1,304 $ 1,215 Servicing asset acquired through acquisition — — 2,382 — Increase from loan sales 534 27 995 204 Servicing asset impairment (188 ) — (188 ) — Amortization charged to income (618 ) (69 ) (972 ) (278 ) Balance at end of period $ 3,521 $ 1,141 $ 3,521 $ 1,141 The estimated fair value of the servicing assets approximated the carrying amount at September 30, 2019 , December 31, 2018 and September 30, 2018 . Fair value is estimated by discounting estimated future cash flows from the servicing assets using discount rates that approximate current market rates over the expected lives of the loans being serviced. A valuation allowance is recorded when the fair value is below the carrying amount of the asset. The Company may also receive a portion of subsequent interest collections on loans sold that exceed the contractual servicing fees. In that case, the Company records an interest-only strip based on its relative fair market value and the other components of the loans. There was no interest-only strip receivable recorded at September 30, 2019 and December 31, 2018 . |