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, 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 December 31, 2017 (In thousands) Portfolio Loans PCI Loans PULs Total Loans Construction and land development $ 215,315 $ 1,121 $ 126,689 $ 343,125 Commercial real estate 1,170,618 9,776 459,598 1,639,992 Residential real estate 845,420 5,626 187,764 1,038,810 Commercial and financial 512,430 894 92,690 606,014 Consumer 178,826 — 10,610 189,436 Total Loans (1) $ 2,922,609 $ 17,417 $ 877,351 $ 3,817,377 (1) Loan balances at December 31, 2018 and 2017 include deferred costs of $16.9 million and $12.9 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, 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 December 31, 2017 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 $ 215,077 $ — $ — $ — $ 238 $ 215,315 Commercial real estate 1,165,738 2,605 585 — 1,690 1,170,618 Residential real estate 836,117 812 75 — 8,416 845,420 Commercial and financial 507,501 2,776 26 — 2,127 512,430 Consumer 178,676 52 — — 98 178,826 Total Portfolio Loans 2,903,109 6,245 686 — 12,569 2,922,609 PULs Construction and land development 126,655 34 — — — 126,689 Commercial real estate 457,899 979 — — 720 459,598 Residential real estate 186,549 128 87 — 1,000 187,764 Commercial and financial 92,315 54 — — 321 92,690 Consumer 10,610 — — — — 10,610 Total PULs 874,028 1,195 87 — 2,041 877,351 PCI Loans Construction and land development 1,121 — — — — 1,121 Commercial real estate 9,352 — — — 424 9,776 Residential real estate 544 642 — — 4,440 5,626 Commercial and financial 844 — — — 50 894 Consumer — — — — — — Total PCI Loans 11,861 642 — — 4,914 17,417 Total Loans $ 3,788,998 $ 8,082 $ 773 $ — $ 19,524 $ 3,817,377 The reduction in interest income associated with loans on nonaccrual status was approximately $1.0 million , $0.7 million , and $0.7 million , for the years ended December 31, 2018 , 2017 , and 2016 , 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, 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 December 31, 2017 (In thousands) Pass Special Mention Substandard Doubtful Total Net Loans Construction and land development $ 328,127 $ 10,414 $ 4,584 $ — $ 343,125 Commercial real estate 1,586,932 29,273 23,787 — 1,639,992 Residential real estate 1,023,925 4,621 10,203 61 1,038,810 Commercial and financial 593,689 3,237 8,838 250 606,014 Consumer 189,354 — 82 — 189,436 Total Net Loans $ 3,722,027 $ 47,545 $ 47,494 $ 311 $ 3,817,377 Loans to directors and executive officers totaled $0.9 million and $1.1 million at December 31, 2018 and 2017 , respectively. No new loans were originated to directors or officers in 2018. At December 31, 2018 and 2017 loans pledged as collateral for borrowings totaled $380 million and $211 million , respectively. Concentrations of Credit The Company’s lending activity primarily occurs within the State of Florida, specifically in the Fort Lauderdale, Boca Raton, West Palm Beach, Daytona Beach, Orlando and Tampa MSAs. 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) 2018 2017 2016 Beginning balance $ 3,699 $ 3,807 $ 2,610 Additions — 763 2,052 Deletions (43 ) (11 ) (15 ) Accretion (1,291 ) (1,647 ) (1,734 ) Reclassifications from non-accretable difference 559 787 894 Ending Balance $ 2,924 $ 3,699 $ 3,807 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 pursues troubled debt restructures (TDR) for loans in selected cases where it expects to realize better values than may be expected through traditional collection activities. The Company has worked with retail mortgage customers, when possible, to achieve lower payment structures in an effort to avoid foreclosure. TDRs have been a part of the Company’s loss mitigation activities and can include rate reductions, payment extensions and principal deferrals. Company policy requires TDRs that are classified as nonaccrual loans after restructuring remain on nonaccrual until performance can be verified, which usually requires six months of performance under the restructured loan terms. The Company’s TDR concessions granted generally do not include forgiveness of principal balances. Loan modifications are not reported in the calendar years after modification if the loans were modified at an interest rate equal to yields of originations with comparable risk and loans are performing based on the terms of the restructuring agreements. When a loan is modified as a TDR, there is not a direct, material impact on the carrying value of the loans within the consolidated balance sheet, as principal balances generally are not forgiven. Most loans prior to modification were classified as an impaired loan and the allowance for loan losses is determined in accordance with Company policy. Loans modified in a TDR were immaterial during the years ended December 31, 2018 , 2017 and 2016 , and there were no material 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 status and a specific allowance for loan losses 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. At December 31, 2018 and 2017 , the Company’s recorded investment in impaired loans, excluding PCI loans, and related valuation allowance was as follows: 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 December 31, 2017 Recorded Unpaid Principal Related Valuation (In thousands) Investment Balance Allowance Impaired Loans with No Related Allowance Recorded: Construction and land development $ 223 $ 510 $ — Commercial real estate 3,475 4,873 — Residential real estate 10,272 15,063 — Commercial and financial 19 29 — Consumer 105 180 — Impaired Loans with an Allowance Recorded: Construction and land development 251 264 23 Commercial real estate 4,780 4,780 195 Residential real estate 8,448 8,651 1,091 Commercial and financial 2,436 883 1,050 Consumer 282 286 43 Total Impaired Loans Construction and land development 474 774 23 Commercial real estate 8,255 9,653 195 Residential real estate 18,720 23,714 1,091 Commercial and financial 2,455 912 1,050 Consumer 387 466 43 Total Impaired Loans $ 30,291 $ 35,519 $ 2,402 Impaired loans also include TDRs where concessions have been granted to borrowers who have experienced financial difficulty. At December 31, 2018 and 2017 , accruing TDRs totaled $13.3 million and $15.6 million , respectively. Average impaired loans for the years ended December 31, 2018 , 2017 , and 2016 were $35.3 million , $30.9 million , and $31.2 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, 2018 , 2017 and 2016 , the Company recorded $2.0 million , $1.5 million , and $1.6 million , respectively, in interest income on impaired loans. For impaired loans whose impairment is measured based on the present value of future cash flows, a total of $0.2 million , $0.3 million and $0.2 million , respectively, for 2018 , 2017 , and 2016 was included in interest income and represents the change in present value attributable to the passage of time. |