LOANS AND LEASES | 4. LOANS AND LEASES Loans and leases, excluding loans held for sale, consisted of the following as of March 31, 2019 and December 31, 2018 : (dollars in thousands) March 31, 2019 December 31, 2018 Commercial, financial and agricultural $ 566,248 $ 581,177 Real estate: Construction 71,483 67,269 Residential mortgage 1,447,970 1,424,384 Home equity 465,798 468,966 Commercial mortgage 1,059,401 1,041,685 Consumer 487,888 492,268 Leases 83 124 Gross loans and leases 4,098,871 4,075,873 Net deferred costs 2,700 2,493 Total loans and leases, net of deferred costs $ 4,101,571 $ 4,078,366 During the three months ended March 31, 2019 , we did not foreclose on any loans. During the three months ended March 31, 2018 , we foreclosed on one loan totaling $40 thousand . During the three months ended March 31, 2019 and 2018 , we did not transfer any loans to the held-for-sale category. We did not sell any portfolio loans during the three months ended March 31, 2019 and 2018 . In the first quarter of 2019, we purchased consumer loans totaling $18.3 million which represented the outstanding balance at the time of purchase. In 2018, we purchased consumer loans totaling $58.6 million , which included a 0.1 million premium over the $58.5 million outstanding balance at the time of purchase. Impaired Loans The following tables present by class, the balance in the allowance for loan and lease losses (the "Allowance") and the recorded investment in loans and leases based on the Company's impairment measurement method as of March 31, 2019 and December 31, 2018 : Real Estate (dollars in thousands) Comml, Fin & Ag Constr Resi Mortgage Home Equity Comml Mortgage Consumer Leases Total March 31, 2019 Allowance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 7,847 1,299 12,851 4,278 12,036 8,956 — 47,267 Total ending balance $ 7,847 $ 1,299 $ 12,851 $ 4,278 $ 12,036 $ 8,956 $ — $ 47,267 Loans and leases: Individually evaluated for impairment $ 199 $ 2,194 $ 9,633 $ 570 $ 2,222 $ — $ — $ 14,818 Collectively evaluated for impairment 566,049 69,289 1,438,337 465,228 1,057,179 487,888 83 4,084,053 Subtotal 566,248 71,483 1,447,970 465,798 1,059,401 487,888 83 4,098,871 Net deferred costs (income) 547 (308 ) 3,824 107 (1,395 ) (75 ) — 2,700 Total loans and leases, net of deferred costs (income) $ 566,795 $ 71,175 $ 1,451,794 $ 465,905 $ 1,058,006 $ 487,813 $ 83 $ 4,101,571 Real Estate (dollars in thousands) Comml, Fin & Ag Constr Resi Mortgage Home Equity Comml Mortgage Consumer Leases Total December 31, 2018 Allowance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 8,027 1,202 14,349 3,788 13,358 7,192 — 47,916 Total ending balance $ 8,027 $ 1,202 $ 14,349 $ 3,788 $ 13,358 7,192 $ — $ 47,916 Loans and leases: Individually evaluated for impairment $ 220 $ 2,273 $ 10,075 $ 275 $ 2,348 $ — $ — $ 15,191 Collectively evaluated for impairment 580,957 64,996 1,414,309 468,691 1,039,337 492,268 124 4,060,682 Subtotal 581,177 67,269 1,424,384 468,966 1,041,685 492,268 124 4,075,873 Net deferred costs (income) 483 (342 ) 3,821 — (1,407 ) (62 ) — 2,493 Total loans and leases, net of deferred costs (income) $ 581,660 $ 66,927 $ 1,428,205 $ 468,966 $ 1,040,278 $ 492,206 $ 124 $ 4,078,366 There were no impaired loans with an allowance recorded as of March 31, 2019 and December 31, 2018 . The following table presents by class, information related to impaired loans as of March 31, 2019 and December 31, 2018 : March 31, 2019 December 31, 2018 Unpaid Recorded Allowance Unpaid Recorded Allowance (dollars in thousands) Impaired loans: Commercial, financial and agricultural $ 309 $ 199 $ — $ 330 $ 220 $ — Real estate: Construction 2,996 2,194 — 3,076 2,273 — Residential mortgage 10,578 9,633 — 11,019 10,075 — Home equity 570 570 — 275 275 — Commercial mortgage 2,222 2,222 — 2,348 2,348 — Total impaired loans $ 16,675 $ 14,818 $ — $ 17,048 $ 15,191 $ — The following table presents by class, the average recorded investment and interest income recognized on impaired loans for the three months ended March 31, 2019 and 2018 : Three Months Ended March 31, 2019 March 31, 2018 (dollars in thousands) Average Interest Average Interest Commercial, financial and agricultural $ 209 $ 3 $ 483 $ 2 Real estate: Construction 2,233 30 2,557 26 Residential mortgage 9,818 106 13,744 137 Home equity 497 — 567 — Commercial mortgage 2,285 23 3,809 38 Total $ 15,042 $ 162 $ 21,160 $ 203 For the three months ended March 31, 2019 and 2018 , the amount of interest income recognized on impaired loans within the period that the loans were impaired were primarily related to loans modified in a troubled debt restructuring ("TDR") that were on accrual status. For the three months ended March 31, 2019 and 2018 , the amount of interest income recognized using a cash-based method of accounting during the period that the loans were impaired was not material. Foreclosure Proceedings The Company had $0.5 million and $0.7 million of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31, 2019 and December 31, 2018 , respectively. Aging Analysis of Accruing and Non-Accruing Loans and Leases For all loan types, the Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The following tables present by class, the aging of the recorded investment in past due loans and leases as of March 31, 2019 and December 31, 2018 : (dollars in thousands) Accruing Accruing Accruing Nonaccrual Total Loans and Total March 31, 2019 Commercial, financial and agricultural $ 924 $ 565 $ — $ — $ 1,489 $ 565,306 $ 566,795 Real estate: Construction — — — — — 71,175 71,175 Residential mortgage 3,559 — — 2,492 6,051 1,445,743 1,451,794 Home equity 108 — — 570 678 465,227 465,905 Commercial mortgage — — — — — 1,058,006 1,058,006 Consumer 1,712 518 159 — 2,389 485,424 487,813 Leases — — — — — 83 83 Total $ 6,303 $ 1,083 $ 159 $ 3,062 $ 10,607 $ 4,090,964 $ 4,101,571 (dollars in thousands) Accruing Accruing Accruing Nonaccrual Total Loans and Total December 31, 2018 Commercial, financial and agricultural $ 1,348 $ 162 $ — $ — $ 1,510 $ 580,150 $ 581,660 Real estate: Construction — — — — — 66,927 66,927 Residential mortgage 3,966 157 — 2,048 6,171 1,422,034 1,428,205 Home equity 433 104 298 275 1,110 467,856 468,966 Commercial mortgage — — — — — 1,040,278 1,040,278 Consumer 2,340 872 238 — 3,450 488,756 492,206 Leases — — — — — 124 124 Total $ 8,087 $ 1,295 $ 536 $ 2,323 $ 12,241 $ 4,066,125 $ 4,078,366 Modifications Troubled debt restructurings ("TDRs") included in nonperforming assets at March 31, 2019 consisted of three Hawaii residential mortgage loans with a combined principal balance of $0.4 million . Concessions made to the original contractual terms of these loans consisted primarily of the deferral of interest and/or principal payments due to deterioration in the borrowers' financial condition. The principal balances on these TDRs had matured and/or were in default at the time of restructure, and we have no commitments to lend additional funds to any of these borrowers. There were $11.8 million of TDRs still accruing interest at March 31, 2019 , none of which were more than 90 days delinquent. At December 31, 2018 , there were $12.9 million of TDRs still accruing interest, none of which were more than 90 days delinquent. Some loans modified in a TDR may already be on nonaccrual status and partial charge-offs may have already been taken against the outstanding loan balance. Thus, these loans have already been identified as impaired and have already been evaluated under the Company's allowance for loan and lease losses (the "Allowance") methodology. Loans that were not on nonaccrual status when modified in a TDR may have the financial effect of increasing the specific allowance associated with the loan. The loans modified in a TDR did not have a material effect on our provision for loan and lease losses (the "Provision") and the Allowance during the three months ended March 31, 2019 . No loans were modified in a TDR during the three months ended March 31, 2019 and 2018 . No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the three months ended March 31, 2019 and 2018 . We had no commitments on TDRs during the three months ended March 31, 2019 and 2018 . Credit Quality Indicators The Company categorizes loans and leases 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 and leases individually by classifying the loans and leases by credit risk. This analysis includes non-homogeneous loans and leases, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings: Special Mention. Loans and leases classified as special mention, while still adequately protected by the borrower's capital adequacy and payment capability, exhibit distinct weakening trends and/or elevated levels of exposure to external conditions. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management's close attention so as to avoid becoming undue or unwarranted credit exposures. Substandard. Loans and leases classified as substandard are inadequately protected by the borrower's current financial condition and payment capability or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Doubtful. Loans and leases classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined. Loss. Loans and leases classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible. Loans and leases not meeting the criteria above are considered to be pass-rated. The following table presents by class and credit indicator, the recorded investment in the Company's loans and leases as of March 31, 2019 and December 31, 2018 : (dollars in thousands) Pass Special Substandard Loss Subtotal Net Total March 31, 2019 Commercial, financial and agricultural $ 554,400 $ 2,142 $ 9,706 $ — $ 566,248 $ 547 $ 566,795 Real estate: Construction 71,483 — — — 71,483 (308 ) 71,175 Residential mortgage 1,445,385 — 2,585 — 1,447,970 3,824 1,451,794 Home equity 465,228 — 570 — 465,798 107 465,905 Commercial mortgage 1,033,791 11,881 13,729 — 1,059,401 (1,395 ) 1,058,006 Consumer 487,729 — 114 45 487,888 (75 ) 487,813 Leases 83 — — — 83 — 83 Total $ 4,058,099 $ 14,023 $ 26,704 $ 45 $ 4,098,871 $ 2,700 $ 4,101,571 (dollars in thousands) Pass Special Substandard Loss Subtotal Net Total December 31, 2018 Commercial, financial and agricultural $ 552,706 $ 7,961 $ 20,510 $ — $ 581,177 $ 483 $ 581,660 Real estate: Construction 67,269 — — — 67,269 (342 ) 66,927 Residential mortgage 1,422,240 — 2,144 — 1,424,384 3,821 1,428,205 Home equity 468,394 — 572 — 468,966 — 468,966 Commercial mortgage 1,029,581 10,412 1,692 — 1,041,685 (1,407 ) 1,040,278 Consumer 492,030 — 80 158 492,268 (62 ) 492,206 Leases 124 — — — 124 — 124 Total $ 4,032,344 $ 18,373 $ 24,998 $ 158 $ 4,075,873 $ 2,493 $ 4,078,366 |