LOANS AND LEASES | 4. LOANS AND LEASES Loans and leases, excluding loans held for sale, consisted of the following as of September 30, 2019 and December 31, 2018 : (dollars in thousands) September 30, 2019 December 31, 2018 Commercial, financial and agricultural $ 576,343 $ 581,177 Real estate: Construction 96,996 67,269 Residential mortgage 1,554,752 1,424,384 Home equity 475,211 468,966 Commercial mortgage 1,135,408 1,041,685 Consumer 526,429 492,268 Leases 31 124 Gross loans and leases 4,365,170 4,075,873 Net deferred costs 2,692 2,493 Total loans and leases, net of deferred costs $ 4,367,862 $ 4,078,366 During the nine months ended September 30, 2019 , we foreclosed on one loan totaling $0.2 million . During the nine months ended September 30, 2018 , we foreclosed on one loan totaling $40 thousand . During the nine months ended September 30, 2019 and 2018 , we did not transfer any loans to the held-for-sale category. We did not sell any portfolio loans during the nine months ended September 30, 2019 and 2018 . Through the third quarter of 2019, we purchased consumer loans with outstanding balances at the time of purchases totaling $80.0 million for $78.8 million , or a net discount of $1.2 million . 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 September 30, 2019 and December 31, 2018 : Real Estate (dollars in thousands) Comml, Fin & Ag Constr Resi Mortgage Home Equity Comml Mortgage Consumer Leases Total September 30, 2019 Allowance: Individually evaluated for impairment $ — $ — $ — $ — $ — $ — $ — $ — Collectively evaluated for impairment 7,781 1,693 13,546 4,287 12,209 8,651 — 48,167 Total ending balance $ 7,781 $ 1,693 $ 13,546 $ 4,287 $ 12,209 $ 8,651 $ — $ 48,167 Loans and leases: Individually evaluated for impairment $ 157 $ — $ 7,516 $ 95 $ 1,985 $ — $ — $ 9,753 Collectively evaluated for impairment 576,186 96,996 1,547,236 475,116 1,133,423 526,429 31 4,355,417 Subtotal 576,343 96,996 1,554,752 475,211 1,135,408 526,429 31 4,365,170 Net deferred costs (income) 269 (335 ) 3,983 354 (1,496 ) (83 ) — 2,692 Total loans and leases, net of deferred costs (income) $ 576,612 $ 96,661 $ 1,558,735 $ 475,565 $ 1,133,912 $ 526,346 $ 31 $ 4,367,862 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 September 30, 2019 and December 31, 2018 . The following table presents by class, information related to impaired loans as of September 30, 2019 and December 31, 2018 : September 30, 2019 December 31, 2018 (dollars in thousands) Unpaid Recorded Allowance Unpaid Recorded Allowance Impaired loans: Commercial, financial and agricultural $ 267 $ 157 $ — $ 330 $ 220 $ — Real estate: Construction — — — 3,076 2,273 — Residential mortgage 8,239 7,516 — 11,019 10,075 — Home equity 95 95 — 275 275 — Commercial mortgage 1,985 1,985 — 2,348 2,348 — Total impaired loans $ 10,586 $ 9,753 $ — $ 17,048 $ 15,191 $ — The following table presents by class, the average recorded investment and interest income recognized on impaired loans for the three and nine months ended September 30, 2019 and 2018 : Three Months Ended Nine Months Ended September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018 (dollars in thousands) Average Interest Average Interest Average Interest Average Interest Commercial, financial and agricultural $ 164 $ 2 $ 399 $ 12 $ 188 $ 7 $ 498 $ 17 Real estate: Construction — — 2,382 30 1,323 62 2,476 84 Residential mortgage 7,536 63 12,857 123 8,763 776 13,208 419 Home equity 190 — 447 — 332 13 516 — Commercial mortgage 2,021 22 3,483 36 2,162 68 3,653 110 Total $ 9,911 $ 87 $ 19,568 $ 201 $ 12,768 $ 926 $ 20,351 $ 630 For the three and nine months ended September 30, 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 and nine months ended September 30, 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 $0.3 million and $0.7 million of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure at September 30, 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 September 30, 2019 and December 31, 2018 : (dollars in thousands) Accruing Accruing Accruing Nonaccrual Total Loans and Total September 30, 2019 Commercial, financial and agricultural $ 5,845 $ 87 $ — $ — $ 5,932 $ 570,680 $ 576,612 Real estate: Construction — — — — — 96,661 96,661 Residential mortgage — 2,327 — 799 3,126 1,555,609 1,558,735 Home equity 320 250 — 95 665 474,900 475,565 Commercial mortgage — — — — — 1,133,912 1,133,912 Consumer 2,974 1,296 235 — 4,505 521,841 526,346 Leases — — — — — 31 31 Total $ 9,139 $ 3,960 $ 235 $ 894 $ 14,228 $ 4,353,634 $ 4,367,862 (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 September 30, 2019 consisted of one Hawaii residential mortgage loan with a principal balance of $0.3 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 $8.9 million of TDRs still accruing interest at September 30, 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 and nine months ended September 30, 2019 . No loans were modified in a TDR during the three and nine months ended September 30, 2019 and 2018 . No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the three and nine months ended September 30, 2019 and 2018 . We had no commitments on TDRs during the three and nine months ended September 30, 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 September 30, 2019 and December 31, 2018 : (dollars in thousands) Pass Special Substandard Loss Subtotal Net Total September 30, 2019 Commercial, financial and agricultural $ 561,372 $ 3,318 $ 11,653 $ — $ 576,343 $ 269 $ 576,612 Real estate: Construction 96,996 — — — 96,996 (335 ) 96,661 Residential mortgage 1,553,869 — 883 — 1,554,752 3,983 1,558,735 Home equity 475,116 — 95 — 475,211 354 475,565 Commercial mortgage 1,096,341 25,757 13,310 — 1,135,408 (1,496 ) 1,133,912 Consumer 526,193 — 149 87 526,429 (83 ) 526,346 Leases 31 — — — 31 — 31 Total $ 4,309,918 $ 29,075 $ 26,090 $ 87 $ 4,365,170 $ 2,692 $ 4,367,862 (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 |