Allowance for Loan Losses | Allowance for Loan Losses The analyses by loan segment of the changes in the allowance for loan losses for the three months ended March 31, 2019 and 2018 , and its allocation by impairment methodology and the related investment in loans, net as of March 31, 2019 and 2018 are summarized in the following tables: Three Months Ended March 31, 2019 (in thousands) Real Estate Commercial Financial Consumer Total Balances at beginning of the period $ 22,778 $ 30,018 $ 445 $ 8,521 $ 61,762 (Reversal of) provision for loan losses (322 ) (31 ) (339 ) 692 — Loans charged-off Domestic — (992 ) — (196 ) (1,188 ) International — (18 ) — (406 ) (424 ) Recoveries — 123 — 49 172 Balances at end of the period $ 22,456 $ 29,100 $ 106 $ 8,660 $ 60,322 Allowance for loan losses by impairment methodology Individually evaluated $ — $ 1,593 $ — $ 1,202 $ 2,795 Collectively evaluated 22,456 27,507 106 7,458 57,527 $ 22,456 $ 29,100 $ 106 $ 8,660 $ 60,322 Investment in loans, net of unearned income Individually evaluated $ 711 $ 12,325 $ — $ 3,392 $ 16,428 Collectively evaluated 3,016,569 2,137,165 27,985 536,291 5,718,010 $ 3,017,280 $ 2,149,490 $ 27,985 $ 539,683 $ 5,734,438 Three Months Ended March 31, 2018 (in thousands) Real Estate Commercial Financial Consumer Total Balances at beginning of the period $ 31,290 $ 32,687 $ 4,362 $ 3,661 $ 72,000 (Reversal of) provision for loan losses (821 ) 535 (691 ) 977 — Loans charged-off Domestic — (382 ) — (19 ) (401 ) International — — — (400 ) (400 ) Recoveries 34 832 — 53 919 Balances at end of the period $ 30,503 $ 33,672 $ 3,671 $ 4,272 $ 72,118 Allowance for loan losses by impairment methodology Individually evaluated $ — $ 2,226 $ — $ — $ 2,226 Collectively evaluated 30,503 31,446 3,671 4,272 69,892 $ 30,503 $ 33,672 $ 3,671 $ 4,272 $ 72,118 Investment in loans, net of unearned income Individually evaluated $ 11,238 $ 15,055 $ — $ 342 $ 26,635 Collectively evaluated 2,803,394 2,139,788 416,292 564,341 5,923,815 $ 2,814,632 $ 2,154,843 $ 416,292 $ 564,683 $ 5,950,450 The following is a summary of the recorded investment amount of loan sales by portfolio segment: Three Months Ended March 31, Real Estate Commercial Financial Consumer Total 2019 $ 23,475 $ 126,838 $ — $ 1,864 $ 152,177 2018 $ 2,958 $ 10,000 $ — $ — $ 12,958 The following is a summary of impaired loans as of March 31, 2019 and December 31, 2018 March 31, 2019 Recorded Investment (in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average (1) Total Unpaid Principal Balance Valuation Allowance Real estate loans Commercial real estate Nonowner occupied $ — $ — $ — $ 5,188 $ — $ — Multi-family residential — 711 711 719 716 — Land development and construction — — — — — — — 711 711 5,907 716 — Single-family residential 3,411 289 3,700 4,182 3,802 1,346 Owner occupied 363 4,352 4,715 5,187 4,715 159 3,774 5,352 9,126 15,276 9,233 1,505 Commercial loans 7,169 120 7,289 7,178 8,427 1,289 Consumer loans and overdrafts 2 11 13 17 11 1 $ 10,945 $ 5,483 $ 16,428 $ 22,471 $ 17,671 $ 2,795 December 31, 2018 Recorded Investment (in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average (1) Total Unpaid Principal Balance Valuation Allowance Real estate loans Commercial real estate Nonowner occupied $ — $ — $ — $ 7,935 $ — $ — Multi-family residential — 717 717 724 722 — Land development and construction loans — — — — — — — 717 717 8,659 722 — Single-family residential 3,086 306 3,392 4,046 3,427 1,235 Owner occupied 169 4,427 4,596 5,524 4,601 75 3,255 5,450 8,705 18,229 8,750 1,310 Commercial loans 4,585 148 4,733 7,464 6,009 1,059 Consumer loans and overdrafts 9 11 20 15 17 4 $ 7,849 $ 5,609 $ 13,458 $ 25,708 $ 14,776 $ 2,373 _______________ (1) Average using trailing four quarter balances. During the three months ended March 31, 2019 and 2018, the Company recognized interest income of $ 18 thousand and $25 thousand , respectively, on impaired loans. There were no new troubled debt restructurings (“TDRs”) during the three months ended March 31, 2019 . Consequently, during the three months ended March 31, 2019, the Company did not incur any charge-offs against the allowance for loan losses as a result of TDR loans. Since March 31, 2018, no TDRs subsequently defaulted under the modified terms of the loan agreement. Credit Risk Quality The Company’s investment in loans by credit quality indicators as of March 31, 2019 and December 31, 2018 are summarized in the following tables: March 31, 2019 Credit Risk Rating Nonclassified Classified (in thousands) Pass Special Mention Substandard Doubtful Loss Total Real estate loans Commercial real estate Nonowner occupied $ 1,844,618 $ 8,285 $ — $ — $ — $ 1,852,903 Multi-family residential 877,574 665 — — 878,239 Land development and construction loans 291,416 — — — — 291,416 3,013,608 8,285 665 — — 3,022,558 Single-family residential 528,792 — 6,514 — — 535,306 Owner occupied 780,457 12,767 8,632 — — 801,856 4,322,857 21,052 15,811 — — 4,359,720 Commercial loans 1,225,901 3,992 9,073 559 — 1,239,525 Loans to financial institutions and acceptances 27,985 — — — — 27,985 Consumer loans and overdrafts 101,264 — 5,944 — — 107,208 $ 5,678,007 $ 25,044 $ 30,828 $ 559 $ — $ 5,734,438 December 31, 2018 Credit Risk Rating Nonclassified Classified (in thousands) Pass Special Mention Substandard Doubtful Loss Total Real estate loans Commercial real estate Nonowner occupied $ 1,802,573 $ 6,561 $ 222 $ — $ — $ 1,809,356 Multi-family residential 909,439 — — — — 909,439 Land development and construction loans 326,644 — — — — 326,644 3,038,656 6,561 222 — — 3,045,439 Single-family residential 526,373 — 7,108 — — 533,481 Owner occupied 758,552 9,019 9,451 — — 777,022 4,323,581 15,580 16,781 — — 4,355,942 Commercial loans 1,369,434 3,943 6,462 589 — 1,380,428 Loans to financial institutions and acceptances 68,965 — — — — 68,965 Consumer loans and overdrafts 108,778 — 6,062 — — 114,840 $ 5,870,758 $ 19,523 $ 29,305 $ 589 $ — $ 5,920,175 | Allowance for Loan Losses The analyses by loan segment of the changes in the allowance for loan losses for the years ended December 31, 2018 , 2017 and 2016 and its allocation by impairment methodology and the related investment in loans, net as of December 31, 2018 , 2017 and 2016 are summarized in the following tables: December 31, 2018 (in thousands) Real Estate Commercial Financial Consumer Total Balances at beginning of the year $ 31,290 $ 32,687 $ 4,362 $ 3,661 $ 72,000 (Reversal of) provision for loan losses (2,885 ) 1,099 (3,917 ) 6,078 375 Loans charged-off Domestic (5,839 ) (3,662 ) — (194 ) (9,695 ) International — (1,473 ) — (1,392 ) (2,865 ) Recoveries 212 1,367 — 368 1,947 Balances at end of the year $ 22,778 $ 30,018 $ 445 $ 8,521 $ 61,762 Allowance for loan losses by impairment methodology Individually evaluated $ — $ 1,282 $ — $ 1,091 $ 2,373 Collectively evaluated 22,778 28,736 445 7,430 59,389 $ 22,778 $ 30,018 $ 445 $ 8,521 $ 61,762 Investment in loans, net of unearned income Individually evaluated $ 717 $ 9,652 $ — $ 3,089 $ 13,458 Collectively evaluated 3,037,604 2,254,607 69,003 545,503 5,906,717 $ 3,038,321 $ 2,264,259 $ 69,003 $ 548,592 $ 5,920,175 December 31, 2017 (in thousands) Real Estate Commercial Financial Consumer Total Balances at beginning of the year $ 30,713 $ 40,897 $ 5,304 $ 4,837 $ 81,751 Reversal of provision for loan losses (221 ) (1,027 ) (942 ) (1,300 ) (3,490 ) Loans charged-off Domestic (97 ) (1,979 ) — (424 ) (2,500 ) International — (6,166 ) — (757 ) (6,923 ) Recoveries 895 962 — 1,305 3,162 Balances at end of the year $ 31,290 $ 32,687 $ 4,362 $ 3,661 $ 72,000 Allowance for loan losses by impairment methodology Individually evaluated $ — $ 2,866 $ — $ — $ 2,866 Collectively evaluated 31,290 29,821 4,362 3,661 69,134 $ 31,290 $ 32,687 $ 4,362 $ 3,661 $ 72,000 Investment in loans, net of unearned income Individually evaluated $ 1,318 $ 20,907 $ — $ 374 $ 22,599 Collectively evaluated 2,912,786 2,073,351 497,626 559,863 6,043,626 $ 2,914,104 $ 2,094,258 $ 497,626 $ 560,237 $ 6,066,225 December 31, 2016 (in thousands) Real Estate Commercial Financial Consumer Total Balances at beginning of the year $ 18,331 $ 44,734 $ 9,226 $ 4,752 $ 77,043 Provision for (reversal of) loan losses 8,570 16,153 (3,922 ) 1,309 22,110 Loans charged-off Domestic (94 ) (1,496 ) — (224 ) (1,814 ) International — (19,610 ) — (1,186 ) (20,796 ) Recoveries 3,906 1,116 — 186 5,208 Balances at end of the year $ 30,713 $ 40,897 $ 5,304 $ 4,837 $ 81,751 Allowance for loan losses by impairment methodology Individually evaluated $ — $ 6,596 $ — $ — $ 6,596 Collectively evaluated 30,713 34,301 5,304 4,837 75,155 $ 30,713 $ 40,897 $ 5,304 $ 4,837 $ 81,751 Investment in loans, net of unearned income Individually evaluated $ 13,792 $ 51,332 $ — $ 4,205 $ 69,329 Collectively evaluated 2,364,161 2,398,552 416,336 516,383 5,695,432 $ 2,377,953 $ 2,449,884 $ 416,336 $ 520,588 $ 5,764,761 The following is a summary of the recorded investment amount of loan sales by portfolio segment in the years ended December 2018, 2017 and 2016: (in thousands) Real Estate Commercial Financial Consumer Total 2018 $ 20,248 $ 138,244 $ — $ 14,981 $ 173,473 2017 $ 15,040 $ 35,260 $ 40,177 $ — $ 90,477 2016 $ 9,151 $ 72,597 $ 23,500 $ — $ 105,248 The following is a summary of impaired loans as of December 31, 2018 and 2017 : December 31, 2018 Recorded Investment (in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average Total Unpaid Principal Balance Valuation Allowance Interest Income Recognized Real estate loans Commercial real estate Nonowner occupied $ — $ — $ — $ 7,935 $ — $ — — Multi-family residential — 717 717 724 722 — 32 Land development and construction — — — — — — — — 717 717 8,659 722 — 32 Single-family residential 3,086 306 3,392 4,046 3,427 1,235 108 Owner-occupied 169 4,427 4,596 5,524 4,601 75 14 3,255 5,450 8,705 18,229 8,750 1,310 154 Commercial loans 4,585 148 4,733 7,464 6,009 1,059 952 Consumer loans and overdrafts 9 11 20 15 17 4 — $ 7,849 $ 5,609 $ 13,458 $ 25,708 $ 14,776 $ 2,373 $ 1,106 December 31, 2017 Recorded Investment (in thousands) With a Valuation Allowance Without a Valuation Allowance Total Year Average Total Unpaid Principal Balance Valuation Allowance Interest Income Recognized Real estate loans Commercial real estate Nonowner occupied $ — $ 327 $ 327 $ 225 $ 327 $ — $ — Multi-family residential — 1,318 1,318 7,898 1,330 — 54 Land development and construction loans — — — 1,359 — — — — 1,645 1,645 9,482 1,657 — 54 Single-family residential — 877 877 3,100 871 — 1,101 Owner-occupied — 10,918 10,918 13,440 12,323 — 11 — 13,440 13,440 26,022 14,851 — 1,166 Commercial loans 7,173 1,986 9,159 18,211 14,784 2,866 12 Consumer loans and overdrafts — — — — — — — $ 7,173 $ 15,426 $ 22,599 $ 44,233 $ 29,635 $ 2,866 $ 1,178 Troubled Debt Restructurings The following table shows information about loans that were modified and met the definition of TDR during 2018, 2017 and 2016: 2018 2017 2016 (in thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Number of Contracts Recorded Investment Real estate loans Commercial real estate Nonowner occupied (1) 1 $ — — $ — 1 $ 208 Single-family residential — — 2 — 1 49 Owner-occupied 1 1,831 1 — 3 846 2 1,831 3 — 5 1,103 Commercial loans 2 622 1 1,473 2 11,172 Consumer loans and overdrafts 1 10 — — — — Total (2) (3) 5 $ 2,463 4 $ 1,473 7 $ 12,275 _________________ (1) In the fourth quarter of 2018, the Company sold one non-performing loan in the Houston area with a carrying value of $10.2 million , and charged off $5.8 million against the allowance for loan losses. This loan had been modified and met the definition of a TDR during the second quarter of 2018. (2) During 2018 and 2017, the Company charged off a total of approximately $6.9 million and $6.0 million , respectively, against the allowance for loan losses as a result of these TDR loans. (3) At December 31, 2018, 2017 and 2016, all TDR loans were primarily real estate and commercial loans under modified terms, including interest payment deferments and others, that did not substantially impact the allowance for loan losses since the recorded investment in these impaired loans corresponded to their realizable value, which approximated their fair values, or higher, prior to their designation as TDR. During 2018, 2017 and 2016, TDR loans that subsequently defaulted within the 12 months of restructuring were as follows: 2018 2017 2016 (in thousands) Number of Contracts Recorded Investment Number of Contracts Recorded Investment Number of Contracts Recorded Investment Real estate loans Single-family residential — $ — — $ — 6 $ 3,010 Owner-occupied 1 1,831 1 618 4 2,959 1 1,831 1 618 10 5,969 Commercial loans 1 589 — — — — Consumer loans and overdrafts 1 10 — — — — 3 $ 2,430 1 $ 618 10 $ 5,969 Credit Risk Quality The sufficiency of the allowance for loan losses is reviewed monthly by the Chief Risk Officer and the Chief Financial Officer. These recommendations are reviewed and approved monthly by the Executive Management Committee. The Board of Directors considers the allowance for loan losses as part of its review of the Company’s consolidated financial statements. As of December 31, 2018 and 2017, the Company believes the allowance for loan losses to be sufficient to absorb losses in the loans portfolio in accordance with U.S. GAAP. Loans may be classified but not considered impaired due to one of the following reasons: (1) the Company has established minimum dollar amount thresholds for loan impairment testing, which results in loans under those thresholds being excluded from impairment testing and therefore not included in impaired loans; (2) classified loans may be considered nonimpaired because collection of all amounts due is probable. As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related primarily to (i) the risk rating of loans, (ii) the loan payment status, (iii) net charge-offs, (iv) nonperforming loans and (v) the general economic conditions in the main geographies where the Company’s borrowers conduct their businesses. The Company considers the views of its regulators as to loan classification and impairment. The Company utilizes a credit risk rating system to identify the risk characteristics of each of its loans, or group of homogeneous loans such as consumer loans. Loans are rated on a quarterly basis (or more frequently when the circumstances require it) on a scale from 1 (worst credit quality) to 10 (best credit quality). Loans are then grouped in five master risk categories for purposes of monitoring rising levels of potential loss risks and to enable the activation of collection or recovery processes as defined in the Company’s Credit Risk Policy. The following is a summary of the master risk categories and their associated loan risk ratings, as well as a description of the general characteristics of the master risk category: Loan Risk Rating Master risk category Nonclassified 4 to 10 Classified 1 to 3 Substandard 3 Doubtful 2 Loss 1 N onclassified This category includes loans considered as Pass and Special Mention. A loan classified as pass is considered of sufficient quality to preclude a lower adverse rating. These loans are generally well protected by the current net worth and paying capacity of the borrower or by the value of any collateral received. Special Mention loans are defined as having potential weaknesses that deserve management’s close attention which, if left uncorrected, could potentially result in further credit deterioration. Special Mention loans may include loans originated with certain credit weaknesses or that developed those weaknesses since their origination. Classified This classification indicates the presence of credit weaknesses which could make loan repayment unlikely, such as partial or total late payments and other contractual defaults. Substandard A loan classified substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. They are characterized by the distinct possibility that the Company will sustain some loss if the credit weaknesses are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets. Doubtful These loans have all the weaknesses inherent in a loan 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. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collection in full in a reasonable period of time. As a result, the possibility of loss is extremely high. Loss Loans classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the assets have absolutely no recovery or salvage value, but not to the point where a write-off should be deferred even though partial recoveries may occur in the future. This classification is based upon current facts, not probabilities. As a result, loans in this category should be promptly charged off in the period in which they surface as uncollectible. Loans by Credit Quality Indicators The Company’s loans by credit quality indicators as of December 31, 2018 and 2017 are summarized in the following tables: December 31, 2018 Credit Risk Rating Nonclassified Classified (in thousands) Pass Special Mention Substandard Doubtful Loss Total Real estate loans Commercial real estate Nonowner occupied $ 1,802,573 $ 6,561 $ 222 $ — $ — $ 1,809,356 Multi-family residential 909,439 — — — — 909,439 Land development and construction loans 326,644 — — — — 326,644 3,038,656 6,561 222 — — 3,045,439 Single-family residential 526,373 — 7,108 — — 533,481 Owner-occupied 758,552 9,019 9,451 — — 777,022 4,323,581 15,580 16,781 — — 4,355,942 Commercial loans 1,369,434 3,943 6,462 589 — 1,380,428 Loans to financial institutions and acceptances 68,965 — — — — 68,965 Consumer loans and overdrafts 108,778 — 6,062 — — 114,840 $ 5,870,758 $ 19,523 $ 29,305 $ 589 $ — $ 5,920,175 December 31, 2017 Credit Risk Rating Nonclassified Classified (in thousands) Pass Special Mention Substandard Doubtful Loss Total Real estate loans Commercial real estate Nonowner occupied $ 1,711,595 $ 1,020 $ 489 $ — $ — $ 1,713,104 Multi-family residential 839,709 — — — — 839,709 Land development and construction loans 406,940 — — — — 406,940 2,958,244 1,020 489 — — 2,959,753 Single-family residential 506,885 — 5,869 — — 512,754 Owner-occupied 592,468 4,051 13,867 — — 610,386 4,057,597 5,071 20,225 — — 4,082,893 Commercial loans 1,334,543 6,100 14,112 — — 1,354,755 Loans to financial institutions and acceptances 497,626 — — — — 497,626 Consumer loans and overdrafts 126,838 — 4,113 — — 130,951 $ 6,016,604 $ 11,171 $ 38,450 $ — $ — $ 6,066,225 Credit Risk Quality Indicators - Consumer Loan Classes The credit risk quality of the Company’s residential real estate and consumer loan portfolios is evaluated by considering the repayment performance of individual borrowers, and then classified on an aggregate or pool basis. Loan secured by real estate in these classes which have been past due 90 days or more, and 120 days (non-real estate secured) or 180 days or more, are classified as Substandard and Loss, respectively. When the Company has documented that past due loans in these classes are well-secured and in the process of collection, then the loans may not be classified. These indicators are updated at least quarterly. Single-family residential loans: December 31, (in thousands, except percentages) 2018 2017 2016 Loan Balance % Loan Balance % Loan Balance % Accrual Loans Current $ 518,106 97.12 % $ 499,307 97.38 % $ 455,410 96.80 % 30-59 Days Past Due 7,634 1.43 % 6,025 1.17 % 4,675 0.99 % 60-89 Days Past Due 633 0.12 % 2,193 0.43 % 1,395 0.30 % 90+ Days Past Due 419 0.08 % 225 0.04 % 116 0.02 % 8,686 1.63 % 8,443 1.64 % 6,186 1.31 % Total Accrual Loans $ 526,792 98.75 % $ 507,750 99.02 % $ 461,596 98.11 % Non-Accrual Loans Current $ 1,624 0.30 % $ 2,086 0.41 % $ 2,290 0.49 % 30-59 Days Past Due 276 0.05 % 584 0.11 % — — % 60-89 Days Past Due 1,703 0.32 % 557 0.11 % 38 0.01 % 90+ Days Past Due 3,086 0.58 % 1,777 0.35 % 6,565 1.39 % 5,065 0.95 % 2,918 0.57 % 6,603 1.40 % Total Non-Accrual Loans 6,689 1.25 % 5,004 0.98 % 8,893 1.89 % $ 533,481 100.00 % $ 512,754 100.00 % $ 470,489 100.00 % Consumer loans and overdrafts: December 31, (in thousands, except percentages) 2018 2017 2016 Loan Balance % Loan Balance % Loan Balance % Accrual Loans Current $ 113,211 98.58 % $ 130,830 99.91 % $ 120,463 98.40 % 30-59 Days Past Due 466 0.41 % 48 0.04 % 1,076 0.88 % 60-89 Days Past Due 243 0.21 % 18 0.01 % 443 0.36 % 90+ Days Past Due 885 0.77 % — — % 370 0.30 % 1,594 1.39 % 66 0.05 % 1,889 1.54 % Total Accrual Loans $ 114,805 99.97 % $ 130,896 99.96 % $ 122,352 99.94 % Non-Accrual Loans Current $ 16 0.01 % $ 16 0.01 % $ 43 0.03 % 30-59 Days Past Due 8 0.01 % 9 0.01 % 22 0.02 % 60-89 Days Past Due — — % 11 0.01 % — — % 90+ Days Past Due 11 0.01 % 19 0.01 % 9 0.01 % 19 0.02 % 39 0.03 % 31 0.03 % Total Non-Accrual Loans 35 0.03 % 55 0.04 % 74 0.06 % $ 114,840 100.00 % $ 130,951 100.00 % $ 122,426 100.00 % |