Loans and Allowance for Loan Losses | LOANS AND ALLOWANCE FOR LOAN LOSSES At September 30, 2019 , the Company’s loan portfolio was $13.00 billion , compared to $11.72 billion at December 31, 2018 . The various categories of loans are summarized as follows: (In thousands) September 30, 2019 December 31, 2018 Consumer: Credit cards $ 195,083 $ 204,173 Other consumer 208,643 201,297 Total consumer 403,726 405,470 Real Estate: Construction 1,712,858 1,300,723 Single family residential 1,448,455 1,440,443 Other commercial 3,630,708 3,225,287 Total real estate 6,792,021 5,966,453 Commercial: Commercial 1,894,819 1,774,909 Agricultural 213,753 164,514 Total commercial 2,108,572 1,939,423 Other 339,046 119,042 Loans 9,643,365 8,430,388 Loans acquired, net of discount and allowance (1) 3,359,587 3,292,783 Total loans $ 13,002,952 $ 11,723,171 _____________________________ (1) See Note 5, Loans Acquired, for segregation of loans acquired by loan class. Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; providing an adequate allowance for loans losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default. Furthermore, a factor that influenced the Company’s judgment regarding the allowance for loan losses consists of a nine-year historical loss average segregated by each primary loan sector. On an annual basis, historical loss rates are calculated for each sector. Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment. Other consumer loans include direct and indirect installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures. Real estate – The real estate loan portfolio consists of construction loans, single family residential loans and commercial loans. Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate. Commercial real estate cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length. The Company monitors these loans closely. Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchases or other expansion projects. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with one or three year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on commercial loans for closely-held or limited liability entities. Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans, excluding loans acquired, segregated by class of loans, are as follows: (In thousands) September 30, 2019 December 31, 2018 Consumer: Credit cards $ 521 $ 296 Other consumer 1,634 2,159 Total consumer 2,155 2,455 Real estate: Construction 1,805 1,269 Single family residential 16,191 11,939 Other commercial 16,985 7,205 Total real estate 34,981 20,413 Commercial: Commercial 35,018 10,049 Agricultural 567 1,284 Total commercial 35,585 11,333 Total $ 72,721 $ 34,201 An age analysis of past due loans, excluding loans acquired, segregated by class of loans, is as follows: (In thousands) Gross 30-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total Loans 90 Days Past Due & Accruing September 30, 2019 Consumer: Credit cards $ 958 $ 650 $ 1,608 $ 193,475 $ 195,083 $ 130 Other consumer 3,383 694 4,077 204,566 208,643 14 Total consumer 4,341 1,344 5,685 398,041 403,726 144 Real estate: Construction 3,690 613 4,303 1,708,555 1,712,858 — Single family residential 10,022 6,395 16,417 1,432,038 1,448,455 — Other commercial 8,009 3,385 11,394 3,619,314 3,630,708 — Total real estate 21,721 10,393 32,114 6,759,907 6,792,021 — Commercial: Commercial 4,999 10,990 15,989 1,878,830 1,894,819 11 Agricultural 285 349 634 213,119 213,753 — Total commercial 5,284 11,339 16,623 2,091,949 2,108,572 11 Other — — — 339,046 339,046 — Total $ 31,346 $ 23,076 $ 54,422 $ 9,588,943 $ 9,643,365 $ 155 December 31, 2018 Consumer: Credit cards $ 1,033 $ 506 $ 1,539 $ 202,634 $ 204,173 $ 209 Other consumer 4,264 896 5,160 196,137 201,297 4 Total consumer 5,297 1,402 6,699 398,771 405,470 213 Real estate: Construction 533 308 841 1,299,882 1,300,723 — Single family residential 7,769 4,127 11,896 1,428,547 1,440,443 — Other commercial 3,379 2,773 6,152 3,219,135 3,225,287 — Total real estate 11,681 7,208 18,889 5,947,564 5,966,453 — Commercial: Commercial 4,472 5,105 9,577 1,765,332 1,774,909 11 Agricultural 467 1,055 1,522 162,992 164,514 — Total commercial 4,939 6,160 11,099 1,928,324 1,939,423 11 Other — — — 119,042 119,042 — Total $ 21,917 $ 14,770 $ 36,687 $ 8,393,701 $ 8,430,388 $ 224 Impaired Loans – A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loans, including scheduled principal and interest payments. This includes loans that are delinquent 90 days or more, nonaccrual loans and certain other loans identified by management. Certain other loans identified by management consist of performing loans with specific allocations of the allowance for loan losses. Impaired loans are carried at the present value of estimated future cash flows using the loan’s existing rate, or the fair value of the collateral if the loan is collateral dependent. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. Impaired loans, net of government guarantees and excluding loans acquired, segregated by class of loans, are as follows: (In thousands) Unpaid Contractual Principal Balance Recorded Investment With No Allowance Recorded Investment With Allowance Total Recorded Investment Related Allowance Average Investment in Impaired Loans Interest Income Recognized Average Investment in Impaired Loans Interest Income Recognized September 30, 2019 Three Months Ended Nine Months Ended Consumer: Credit cards $ 521 $ 521 $ — $ 521 $ — $ 423 $ 40 $ 370 $ 110 Other consumer 1,783 1,634 — 1,634 — 1,603 9 1,730 33 Total consumer 2,304 2,155 — 2,155 — 2,026 49 2,100 143 Real estate: Construction 1,898 1,708 97 1,805 — 1,972 10 1,946 38 Single family residential 17,526 13,985 2,206 16,191 31 15,920 85 14,812 287 Other commercial 15,642 4,200 11,007 15,207 628 11,739 77 10,365 201 Total real estate 35,066 19,893 13,310 33,203 659 29,631 172 27,123 526 Commercial: Commercial 50,712 10,153 23,930 34,083 4,620 32,020 176 26,379 511 Agricultural 583 450 116 566 — 873 3 1,010 20 Total commercial 51,295 10,603 24,046 34,649 4,620 32,893 179 27,389 531 Total $ 88,665 $ 32,651 $ 37,356 $ 70,007 $ 5,279 $ 64,550 $ 400 $ 56,612 $ 1,200 December 31, 2018 Three Months Ended Nine Months Ended Consumer: Credit cards $ 296 $ 296 $ — $ 296 $ — $ 283 $ 35 $ 259 $ 60 Other consumer 2,311 2,159 — 2,159 — 3,561 28 4,109 96 Total consumer 2,607 2,455 — 2,455 — 3,844 63 4,368 156 Real estate: Construction 1,344 784 485 1,269 211 1,411 11 1,747 41 Single family residential 12,906 11,468 616 12,084 36 13,577 98 13,550 315 Other commercial 8,434 5,442 5,458 10,900 — 12,282 108 14,284 332 Total real estate 22,684 17,694 6,559 24,253 247 27,270 217 29,581 688 Commercial: Commercial 10,361 7,254 4,628 11,882 437 11,840 108 9,533 222 Agricultural 2,419 1,180 — 1,180 — 1,355 12 1,470 34 Total commercial 12,780 8,434 4,628 13,062 437 13,195 120 11,003 256 Total $ 38,071 $ 28,583 $ 11,187 $ 39,770 $ 684 $ 44,309 $ 400 $ 44,952 $ 1,100 At September 30, 2019 and December 31, 2018 , impaired loans, net of government guarantees and excluding loans acquired, totaled $70.0 million and $39.8 million , respectively. Allocations of the allowance for loan losses relative to impaired loans were $5.3 million and $684,000 at September 30, 2019 and December 31, 2018 , respectively. Approximately $400,000 and $1,200,000 of interest income was recognized on average impaired loans of $64.6 million and $56.6 million for the three and nine months ended September 30, 2019 . Interest income recognized on impaired loans on a cash basis during the three and nine months ended September 30, 2019 and 2018 was not material. Included in certain impaired loan categories are troubled debt restructurings (“TDRs”). When the Company restructures a loan to a borrower that is experiencing financial difficulty and grants a concession that it would not otherwise consider, a “troubled debt restructuring” results and the Company classifies the loan as a TDR. The Company grants various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal. Under ASC Topic 310-10-35 – Subsequent Measurement , a TDR is considered to be impaired, and an impairment analysis must be performed. The Company assesses the exposure for each modification, either by collateral discounting or by calculation of the present value of future cash flows, and determines if a specific allocation to the allowance for loan losses is needed. Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place. The Company returns TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months. The following table presents a summary of TDRs, excluding loans acquired, segregated by class of loans. Accruing TDR Loans Nonaccrual TDR Loans Total TDR Loans (Dollars in thousands) Number Balance Number Balance Number Balance September 30, 2019 Real estate: Construction — $ — 1 $ 97 1 $ 97 Single-family residential 6 549 10 627 16 1,176 Other commercial 2 3,166 2 950 4 4,116 Total real estate 8 3,715 13 1,674 21 5,389 Commercial: Commercial 4 2,804 3 84 7 2,888 Total commercial 4 2,804 3 84 7 2,888 Total 12 $ 6,519 16 $ 1,758 28 $ 8,277 December 31, 2018 Real estate: Construction — $ — 3 $ 485 3 $ 485 Single-family residential 6 230 10 616 16 846 Other commercial 2 3,306 2 1,027 4 4,333 Total real estate 8 3,536 15 2,128 23 5,664 Commercial: Commercial 4 2,833 6 718 10 3,551 Total commercial 4 2,833 6 718 10 3,551 Total 12 $ 6,369 21 $ 2,846 33 $ 9,215 The following table presents loans that were restructured as TDRs during the three and nine months ended September 30, 2019 and 2018 , excluding loans acquired, segregated by class of loans. Modification Type (Dollars in thousands) Number of Loans Balance Prior to TDR Balance at September 30, Change in Maturity Date Change in Rate Financial Impact on Date of Restructure Three and Nine Months Ended September 30, 2019 Real estate: Single-family residential 1 $ 330 $ 330 $ 330 $ — $ — Total real estate 1 330 330 330 — — Total 1 $ 330 $ 330 $ 330 $ — $ — Three Months Ended September 30, 2018 Real estate: Construction 1 $ 99 $ 98 $ 98 $ — $ — Other commercial 2 392 390 390 — 212 Total real estate 3 491 488 488 — 212 Commercial: Commercial 3 2,363 2,358 2,358 — 190 Total commercial 3 2,363 2,358 2,358 — 190 Total 6 $ 2,854 $ 2,846 $ 2,846 $ — $ 402 Nine Months Ended September 30, 2018 Consumer: Other consumer 1 $ 91 $ 91 $ 91 $ — $ — Total consumer 1 91 91 91 — — Real estate: Construction 1 99 98 98 — — Single-family residential 1 61 62 62 — — Other commercial 2 392 390 390 — 212 Total real estate 4 552 550 550 — 212 Commercial: Commercial 3 2,363 2,358 2,358 — 190 Total commercial 3 2,363 2,358 2,358 — 190 Total 8 $ 3,006 $ 2,999 $ 2,999 $ — $ 402 During the three and nine months ended September 30, 2019 , the Company modified 1 loan with a recorded investment of $330,000 prior to modification which was deemed troubled debt restructuring. The restructured loan was modified by deferring amortized principal payments, changing the maturity date and requiring interest-only payments for a period of up to 12 months. Also, there was no immediate financial impact from the restructuring of this loan, as it was not considered necessary to charge-off interest or principal on the date of restructure. During the three months ended September 30, 2018 , the Company modified 6 loans with a recorded investment of $2.9 million and during the nine months ended September 30, 2018 , the Company modified 8 loans with a recorded investment of $3.0 million prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by deferring amortized principal payments, changing the maturity date and requiring interest-only payments for a period of up to 12 months. Based on the fair value of the collateral, a specific reserve of $402,000 was determined necessary for these loans. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure. There were four loans consisting of commercial and real estate construction loans, considered TDRs for which a payment default occurred during the nine months ended September 30, 2019 . The Company charged off approximately $552,000 for these loans. There was one commercial real estate loan for which a payment default occurred during the nine months ended September 30, 2018 . A charge-off of $66,300 was recorded for this loan and $294,300 was transferred to OREO. The Company defines a payment default as a payment received more than 90 days after its due date. In addition to the TDRs that occurred during the periods provided in the preceding tables, the Company had TDRs with pre-modification loan balances, specifically in commercial real estate, of $294,300 at September 30, 2018 , for which OREO was received in full or partial satisfaction of the loans. There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three or nine month periods ended September 30, 2019 . At September 30, 2019 and December 31, 2018 , the Company had $3,925,000 and $3,899,000 , respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At September 30, 2019 and December 31, 2018 , the Company had $4,401,000 and $3,530,000 , respectively, of OREO secured by residential real estate properties. Credit Quality Indicators – 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 to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions in the States of Arkansas, Colorado, Illinois, Kansas, Missouri, Oklahoma, Tennessee and Texas. The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 8. A description of the general characteristics of the 8 risk ratings is as follows: • Risk Rate 1 – Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength. • Risk Rate 2 – Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”). • Risk Rate 3 – Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters. • Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability. • Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices. • Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan. • Risk Rate 7 – Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status. • Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible. Loans acquired are evaluated using this internal grading system. Loans acquired are evaluated individually and include purchased credit impaired loans of $3.1 million and $4.1 million that are accounted for under ASC Topic 310-30 and are classified as substandard (Risk Rating 6) as of September 30, 2019 and December 31, 2018 , respectively. Of the remaining loans acquired and accounted for under ASC Topic 310-20, $37.4 million and $50.4 million were classified (Risk Ratings 6, 7 and 8 – see classified loans discussion below) at September 30, 2019 and December 31, 2018 , respectively. Purchased credit impaired loans are loans that showed evidence of deterioration of credit quality since origination and for which it is probable, at acquisition, that the Company will be unable to collect all amounts contractually owed. Their fair value was initially based on the estimate of cash flows, both principal and interest, expected to be collected or estimated collateral values if cash flows are not estimable, discounted at prevailing market rates of interest. The difference between the undiscounted cash flows expected at acquisition and the fair value at acquisition is recognized as interest income on a level-yield method over the life of the loan. Contractually required payments for interest and principal that exceed the undiscounted cash flows expected at acquisition are not recognized as a yield adjustment. Increases in expected cash flows subsequent to the initial investment are recognized prospectively through adjustment of the yield on the loan over its remaining life. Decreases in expected cash flows are recognized as impairment. Classified loans for the Company include loans in Risk Ratings 6, 7 and 8. 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. Loans rated 6 – 8 that fall under the threshold amount are not tested for impairment and therefore are not included in impaired loans. (2) Of the loans that are above the threshold amount and tested for impairment, after testing, some are considered to not be impaired and are not included in impaired loans. Total classified loans, excluding loans accounted for under ASC Topic 310-30, were $146.2 million and $119.0 million , as of September 30, 2019 and December 31, 2018 , respectively. The following table presents a summary of loans by credit risk rating as of September 30, 2019 and December 31, 2018 , segregated by class of loans. Loans accounted for under ASC Topic 310-30 are all included in Risk Rate 1-4 in this table. (In thousands) Risk Rate 1-4 Risk Rate 5 Risk Rate 6 Risk Rate 7 Risk Rate 8 Total September 30, 2019 Consumer: Credit cards $ 194,433 $ — $ 650 $ — $ — $ 195,083 Other consumer 206,647 — 1,996 — — 208,643 Total consumer 401,080 — 2,646 — — 403,726 Real estate: Construction 1,705,376 1,456 6,026 — — 1,712,858 Single family residential 1,422,086 3,246 23,119 4 — 1,448,455 Other commercial 3,571,706 33,030 25,972 — — 3,630,708 Total real estate 6,699,168 37,732 55,117 4 — 6,792,021 Commercial: Commercial 1,837,374 10,420 47,025 — — 1,894,819 Agricultural 213,072 69 612 — — 213,753 Total commercial 2,050,446 10,489 47,637 — — 2,108,572 Other 339,046 — — — — 339,046 Loans acquired 3,272,024 46,796 40,639 128 — 3,359,587 Total $ 12,761,764 $ 95,017 $ 146,039 $ 132 $ — $ 13,002,952 (In thousands) Risk Rate 1-4 Risk Rate 5 Risk Rate 6 Risk Rate 7 Risk Rate 8 Total December 31, 2018 Consumer: Credit cards $ 203,667 $ — $ 506 $ — $ — $ 204,173 Other consumer 198,840 — 2,457 — — 201,297 Total consumer 402,507 — 2,963 — — 405,470 Real estate: Construction 1,296,988 1,910 1,825 — — 1,300,723 Single family residential 1,420,052 1,628 18,528 235 — 1,440,443 Other commercial 3,193,289 17,169 14,829 — — 3,225,287 Total real estate 5,910,329 20,707 35,182 235 — 5,966,453 Commercial: Commercial 1,742,002 8,357 24,550 — — 1,774,909 Agricultural 162,824 75 1,615 — — 164,514 Total commercial 1,904,826 8,432 26,165 — — 1,939,423 Other 119,042 — — — — 119,042 Loans acquired 3,187,083 51,255 54,097 348 — 3,292,783 Total $ 11,523,787 $ 80,394 $ 118,407 $ 583 $ — $ 11,723,171 Allowance for Loan Losses Allowance for Loan Losses – The allowance for loan losses is a reserve established through a provision for loan losses charged to expense, which represents management’s best estimate of probable losses that have been incurred within the existing portfolio of loans. The allowance, in the judgment of management, is necessary to reserve for estimated loan losses and risks inherent in the loan portfolio. The Company’s allowance for loan loss methodology includes allowance allocations calculated in accordance with ASC Topic 310-10, Receivables , and allowance allocations calculated in accordance with ASC Topic 450-20, Loss Contingencies . Accordingly, the methodology is based on the Company’s internal grading system, specific impairment analysis, qualitative and quantitative factors. As mentioned above, allocations to the allowance for loan losses are categorized as either specific allocations or general allocations. A loan is considered impaired when it is probable that the Company will not receive all amounts due according to the contractual terms of the loan, including scheduled principal and interest payments. For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for loan losses as a specific allocation. If the loan is not collateral dependent, the measurement of loss is based on the difference between the expected and contractual future cash flows of the loan. The general allocation is calculated monthly based on management’s assessment of several factors such as (1) historical loss experience based on volumes and types, (2) volume and trends in delinquencies and nonaccruals, (3) lending policies and procedures including those for loan losses, collections and recoveries, (4) national, state and local economic trends and conditions, (5) external factors and pressure from competition, (6) the experience, ability and depth of lending management and staff, (7) seasoning of new products obtained and new markets entered through acquisition and (8) other factors and trends that will affect specific loans and categories of loans. The Company establishes general allocations for each major loan category. This category also includes allocations to loans which are collectively evaluated for loss such as credit cards, one-to-four family owner occupied residential real estate loans and other consumer loans. The following table details activity in the allowance for loan losses by portfolio segment for legacy loans for the three and nine months ended September 30, 2019 . Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Three Months Ended September 30, 2019 Balance, beginning of period (2) $ 21,739 $ 34,917 $ 3,951 $ 2,460 $ 63,067 Provision for loan losses (1) 19,150 2,405 946 (528 ) 21,973 Charge-offs (17,729 ) (907 ) (1,117 ) (1,059 ) (20,812 ) Recoveries 65 55 223 1,422 1,765 Net charge-offs (17,664 ) (852 ) (894 ) 363 (19,047 ) Balance, September 30, 2019 (2) $ 23,225 $ 36,470 $ 4,003 $ 2,295 $ 65,993 Nine Months Ended September 30, 2019 Balance, beginning of period (2) $ 20,514 $ 29,743 $ 3,923 $ 2,419 $ 56,599 Provision for loan losses (1) 23,980 7,929 2,644 1,320 35,873 Charge-offs (21,564 ) (1,552 ) (3,298 ) (3,497 ) (29,911 ) Recoveries 295 350 734 2,053 3,432 Net charge-offs (21,269 ) (1,202 ) (2,564 ) (1,444 ) (26,479 ) Balance, September 30, 2019 (2) $ 23,225 $ 36,470 $ 4,003 $ 2,295 $ 65,993 Period-end amount allocated to: Loans individually evaluated for impairment $ 4,620 $ 659 $ — $ — $ 5,279 Loans collectively evaluated for impairment 18,605 35,811 4,003 2,295 60,714 Balance, September 30, 2019 (2) $ 23,225 $ 36,470 $ 4,003 $ 2,295 $ 65,993 (1) Provision for loan losses of $0 and $2,464,000 attributable to loans acquired was excluded from this table for the three and nine months ended September 30, 2019 , respectively (total provision for loan losses for the three and nine months ended September 30, 2019 was $21,973,000 and $38,337,000 ). There were $515,000 and $2,862,000 in charge-offs for loans acquired during the three and nine months ended September 30, 2019 , respectively, and recoveries of $900,000 for loans acquired during the nine month period ended September 30, 2019 , resulting in an ending balance in the allowance related to loans acquired of $597,000 . (2) Allowance for loan losses at September 30, 2019 includes $597,000 allowance for loans acquired (not shown in the table above). Allowance for loan losses at June 30, 2019 and December 31, 2018 includes $1,112,000 and $95,000 , respectively, of allowance for loans acquired (not shown in the table above). The total allowance for loan losses at September 30, 2019 was $66,590,000 and total allowance for loan losses at June 30, 2019 and December 31, 2018 was $64,179,000 and $56,694,000 , respectively. Activity in the allowance for loan losses for the three and nine months ended September 30, 2018 was as follows: (In thousands) Commercial Real Estate Credit Card Other Consumer and Other Total Three Months Ended September 30, 2 |