Loans | Loans The Company accounts for a loan depending on the strategy for the loan and on the credit impaired status of the loan upon acquisition. Loans are accounted for using the following categories: • Loans and leases held for sale • Loans and leases originated by the Company and held for investment • Loans and leases purchased by the Company, which are considered purchased unimpaired (“PUL”), and held for investment • Loans and leases purchased by the Company, which are considered purchased credit impaired (“PCI”) Refer to Note A for further discussion on how the categories above are defined. Loans are also categorized based on the customer and use type of the credit extended. The following outlines the categories used: • Construction and Land Development Loans: The Company defines construction and land development loans as exposures secured by land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or significant source of repayment is from proceeds of the sale, refinancing, or permanent financing of the property. • Commercial Real Estate Loans: Commercial real estate loans are subject to underwriting standards and processes similar to commercial and industrial loans. These loans are viewed primarily as cash flow loans and the repayment of these loans is largely dependent on rental income from the successful operation of the property. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type. • Residential Real Estate Loans: The Company selectively adds residential mortgage loans to its portfolio, primarily loans with adjustable rates, home equity mortgages and home equity lines. Substantially all residential originations have been underwritten to conventional loan agency standards, including loans having balances that exceed agency value limitations. • Commercial and Financial Loans: Commercial credit is extended primarily to small to medium sized professional firms, retail and wholesale operators and light industrial and manufacturing concerns. Such credits typically comprise working capital loans, loans for physical asset expansion, asset acquisition and other business loans. Loans to closely held businesses will generally be guaranteed in full or for a meaningful amount by the businesses’ major owners. Commercial loans are based primarily on the historical and projected cash flow of the borrower and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower. The cash flows of borrowers, however, may not behave as forecasted and collateral securing loans may fluctuate in value due to economic or individual performance factors. Minimum standards and underwriting guidelines have been established for all commercial loan types. • Consumer Loans: The Company originates consumer loans including installment loans and revolving lines, loans for automobiles, boats, and other personal, family and household purposes. For each loan type several factors including debt to income, type of collateral and loan to collateral value, credit history and Company relationship with the borrower are considered during the underwriting process. The following table outlines net loans balances by category as of: December 31, 2019 (In thousands) Portfolio Loans PCI Loans PULs Total Loans Construction and land development $ 281,335 $ 160 $ 43,618 $ 325,113 Commercial real estate 1,834,811 10,217 533,943 2,378,971 Residential real estate 1,304,305 1,710 201,848 1,507,863 Commercial and financial 697,301 579 80,372 778,252 Consumer 200,166 — 8,039 208,205 Total Loans 1 $ 4,317,918 $ 12,666 $ 867,820 $ 5,198,404 December 31, 2018 (In thousands) Portfolio Loans PCI Loans PULs Total Loans Construction and land development $ 301,473 $ 151 $ 141,944 $ 443,568 Commercial real estate 1,437,989 10,828 683,249 2,132,066 Residential real estate 1,055,525 2,718 266,134 1,324,377 Commercial and financial 603,057 737 118,528 722,322 Consumer 190,207 — 12,674 202,881 Total Loans 1 $ 3,588,251 $ 14,434 $ 1,222,529 $ 4,825,214 1 Loan balances at December 31, 2019 and 2018 include deferred costs of $19.9 million and $16.9 million, respectively. Loan accrual status is a primary qualitative credit factor monitored by the Company’s Credit Risk Management when determining the allowance for loan and lease losses. As a loan remains delinquent, the likelihood increases that a borrower is either unable or unwilling to repay. Loans are moved to nonaccrual status when they become 90 days past due, have been evaluated for impairment and have been deemed impaired. The following table presents the balances outstanding status by class of loans as of: December 31, 2019 Accruing 30-59 Days Accruing 60-89 Days Accruing Greater Than Total Financing (In thousands) Current Past Due Past Due 90 Days Nonaccrual Receivables Portfolio Loans Construction and land development $ 276,984 $ — $ — $ — $ 4,351 $ 281,335 Commercial real estate 1,828,629 1,606 220 — 4,356 1,834,811 Residential real estate 1,294,778 1,564 18 — 7,945 1,304,305 Commercial and financial 690,412 2,553 — 108 4,228 697,301 Consumer 199,424 317 315 — 110 200,166 Total Portfolio Loans 4,290,227 6,040 553 108 20,990 4,317,918 PULs Construction and land development 43,044 — — — 574 43,618 Commercial real estate 531,325 942 431 — 1,245 533,943 Residential real estate 201,159 277 — — 412 201,848 Commercial and financial 78,705 — — — 1,667 80,372 Consumer 8,039 — — — — 8,039 Total PULs 862,272 1,219 431 — 3,898 867,820 PCI Loans Construction and land development 148 — — — 12 160 Commercial real estate 9,298 — — — 919 10,217 Residential real estate 587 — — — 1,123 1,710 Commercial and financial 566 — — — 13 579 Consumer — — — — — — Total PCI Loans 10,599 — — — 2,067 12,666 Total Loans $ 5,163,098 $ 7,259 $ 984 $ 108 $ 26,955 $ 5,198,404 December 31, 2018 Accruing 30-59 Days Accruing 60-89 Days Accruing Greater Than Total Financing (In thousands) Current Past Due Past Due 90 Days Nonaccrual Receivables Portfolio Loans Construction and land development $ 301,348 $ 97 $ — $ — $ 28 $ 301,473 Commercial real estate 1,427,413 3,852 97 141 6,486 1,437,989 Residential real estate 1,044,375 2,524 525 295 7,806 1,055,525 Commercial and financial 594,930 5,186 1,661 — 1,280 603,057 Consumer 189,061 637 326 — 183 190,207 Total Portfolio Loans 3,557,127 12,296 2,609 436 15,783 3,588,251 PULs Construction and land development 140,013 1,931 — — — 141,944 Commercial real estate 680,060 1,846 — — 1,343 683,249 Residential real estate 260,781 1,523 — 90 3,740 266,134 Commercial and financial 116,173 342 — — 2,013 118,528 Consumer 12,643 — 31 — — 12,674 Total PULs 1,209,670 5,642 31 90 7,096 1,222,529 PCI Loans Construction and land development 135 — — — 16 151 Commercial real estate 8,403 1,034 — — 1,391 10,828 Residential real estate 556 — — — 2,162 2,718 Commercial and financial 74 635 — — 28 737 Consumer — — — — — — Total PCI Loans 9,168 1,669 — — 3,597 14,434 Total Loans $ 4,775,965 $ 19,607 $ 2,640 $ 526 $ 26,476 $ 4,825,214 The reduction in interest income associated with loans on nonaccrual status was approximately $0.4 million , $1.0 million , and $0.7 million , for the years ended December 31, 2019 , 2018 , and 2017 , respectively. The Company’s Credit Risk Management also utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system: • Pass: Loans that are not problems or potential problem loans are considered to be pass-rated. • Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management’s close attention are deemed to be Special Mention. • Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. • Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off. Risk ratings on commercial lending facilities are re-evaluated during the annual review process at a minimum, based on the size of the aggregate exposure, and/or when there is a credit action of the existing credit exposure. The following tables present the risk category of loans by class of loans based on the most recent analysis performed as of: December 31, 2019 (In thousands) Pass Special Mention Substandard Doubtful Total Net Loans Construction and land development $ 317,765 $ 2,235 $ 5,113 $ — $ 325,113 Commercial real estate 2,331,725 26,827 20,098 321 2,378,971 Residential real estate 1,482,278 7,364 18,221 — 1,507,863 Commercial and financial 755,957 11,925 9,496 874 778,252 Consumer 203,966 3,209 1,030 — 208,205 Total Net Loans $ 5,091,691 $ 51,560 $ 53,958 $ 1,195 $ 5,198,404 December 31, 2018 (In thousands) Pass Special Mention Substandard Doubtful Total Net Loans Construction and land development $ 428,044 $ 10,429 $ 5,095 $ — $ 443,568 Commercial real estate 2,063,589 41,429 27,048 — 2,132,066 Residential real estate 1,296,634 3,654 24,089 — 1,324,377 Commercial and financial 707,663 8,387 6,247 25 722,322 Consumer 198,367 3,397 1,117 — 202,881 Total Net Loans $ 4,694,297 $ 67,296 $ 63,596 $ 25 $ 4,825,214 Loans to directors and executive officers totaled $1.7 million and $0.9 million at December 31, 2019 and 2018 , respectively. No new loans were originated to directors or officers in 2019. Concentrations of Credit The Company's lending activity occurs primarily in Florida, with concentrations in the state's fastest growing markets including the Fort Lauderdale, Boca Raton, Palm Beach, Daytona, Orlando and Tampa markets. PCI Loans PCI loans are accounted for pursuant to ASC Topic 310-30. The excess of cash flows expected to be collected over the estimated fair value is referred to as the accretable yield and is recognized in interest income over the remaining life of the loan in situations where there is a reasonable expectation about the timing and amount of cash flows expected to be collected. The difference between the contractually required payments and the cash flows expected to be collected at acquisition, considering the impact of prepayments, is referred to as the nonaccretable difference. The table below summarizes the changes in accretable yield on PCI loans for the years ended: December 31, (In thousands) 2019 2018 2017 Beginning balance $ 2,924 $ 3,699 $ 3,807 Additions — — 763 Deletions — (43 ) (11 ) Accretion (1,778 ) (1,291 ) (1,647 ) Reclassifications from non-accretable difference 703 559 787 Ending Balance $ 1,849 $ 2,924 $ 3,699 See Note S for information related to loans purchased in transactions accounted for as business combinations during the periods presented. Troubled Debt Restructured Loans The Company’s Troubled Debt Restructuring (“TDR”) concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructured agreements. Most loans prior to modification were classified as impaired and the allowance for loan losses is determined in accordance with Company policy. During the twelve months ended December 31, 2019 , there were nine loans totaling $4.7 million modified in a TDR. There were four defaults totaling $3.2 million of loans modified in TDRs within the twelve months preceding December 31, 2019 . During the twelve months ended December 31, 2018 , there were four loans totaling $0.2 million modified in a TDR and there were no payment defaults on loans that had been modified to a TDR within the previous twelve months. During the twelve months ended December 31, 2017 , there was one loan totaling $0.1 million modified in a TDR and there were no payment defaults on loans that had been modified to a TDR within the previous twelve months. The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, or has been transferred to other real estate owned. A defaulted TDR is generally placed on nonaccrual and a specific allowance for loan loss is assigned in accordance with the Company’s policy. Impaired Loans Loans are considered impaired if they are 90 days or more past due, in nonaccrual status, or are TDRs. As of December 31, 2019 and 2018 , the Company’s recorded investment in impaired loans, excluding PCI loans, and related valuation allowance was as follows: December 31, 2019 Recorded Unpaid Principal Related Valuation (In thousands) Investment Balance Allowance Impaired Loans with No Related Allowance Recorded: Construction and land development $ 4,995 $ 5,186 $ — Commercial real estate 6,070 7,590 — Residential real estate 9,470 14,182 — Commercial and financial 3,485 4,475 — Consumer 111 125 — Impaired Loans with an Allowance Recorded: Construction and land development 62 78 14 Commercial real estate 4,196 4,196 220 Residential real estate 4,914 4,914 834 Commercial and financial 2,567 3,115 1,731 Consumer 226 239 59 Total Impaired Loans Construction and land development 5,057 5,264 14 Commercial real estate 10,266 11,786 220 Residential real estate 14,384 19,096 834 Commercial and financial 6,052 7,590 1,731 Consumer 337 364 59 Total Impaired Loans $ 36,096 $ 44,100 $ 2,858 December 31, 2018 Recorded Unpaid Principal Related Valuation (In thousands) Investment Balance Allowance Impaired Loans with No Related Allowance Recorded: Construction and land development $ 15 $ 229 $ — Commercial real estate 3,852 5,138 — Residential real estate 13,510 18,111 — Commercial and financial 1,191 1,414 — Consumer 280 291 — Impaired Loans with an Allowance Recorded: Construction and land development 196 211 22 Commercial real estate 9,786 12,967 369 Residential real estate 5,537 5,664 805 Commercial and financial 2,131 2,309 1,498 Consumer 202 211 34 Total Impaired Loans Construction and land development 211 440 22 Commercial real estate 13,638 18,105 369 Residential real estate 19,047 23,775 805 Commercial and financial 3,322 3,723 1,498 Consumer 482 502 34 Total Impaired Loans $ 36,700 $ 46,545 $ 2,728 Impaired loans also include TDRs where concessions have been granted to borrowers who have experienced financial difficulty. At December 31, 2019 and 2018 , accruing TDRs totaled $11.1 million and $13.3 million , respectively. Average impaired loans for the years ended December 31, 2019 , 2018 , and 2017 were $35.6 million , $35.3 million , and $30.9 million , respectively. The impaired loans were measured for impairment based on the value of underlying collateral or the present value of expected future cash flows discounted at the loan’s effective interest rate. The valuation allowance is included in the allowance for loan losses. Interest payments received on impaired loans are recorded as interest income unless collection of the remaining recorded investment is doubtful, at which time payments received are recorded as reductions in principal. For the years ended December 31, 2019 , 2018 and 2017 , the Company recorded $2.0 million , $2.0 million , and $1.5 million , respectively, in interest income on impaired loans. For impaired loans whose impairment is measured based on the present value of expected future cash flows, a total of $0.1 million , $0.2 million and $0.3 million , respectively, for 2019 , 2018 , and 2017 was included in interest income and represents the change in present value attributable to the passage of time. |