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Loans
 9 Months Ended
Sep. 30, 2019
Receivables [Abstract]  
Portfolio Loans LOANS

The loan portfolio is comprised of loans originated by the Company and loans acquired in connection with the Company’s acquisitions. These loans are accounted for using the guidance in the Accounting Standards Codification (ASC) sections 310-30 and 310-20. Loans accounted for using ASC 310-30 are sometimes referred to as purchased credit impaired (“PCI”) loans.
 
The table below shows the loan portfolio composition including carrying value categorized by loans accounted for at amortized cost, which includes our originated loans, and by loans accounted for as PCI.

(in thousands)

September 30, 2019
 
December 31, 2018
Loans accounted for at amortized cost
$
5,132,391

 
$
4,303,600

Loans accounted for as PCI
95,623

 
46,401

Total loans
$
5,228,014

 
$
4,350,001


At September 30, 2019, loans acquired in the Trinity acquisition included $562.4 million accounted for at amortized cost and $62.2 million accounted for as PCI. These loans were recorded at fair value with no allowance for loan losses.

The table below shows the composition of the allowance for loan losses:
(in thousands)

September 30, 2019
 
December 31, 2018
Allowance for loans accounted for at amortized cost
$
43,698

 
$
42,295

Allowance for loans accounted for as PCI
857

 
1,181

Total allowance for loan losses
$
44,555

 
$
43,476


Below is a summary of loans by category at September 30, 2019 and December 31, 2018:
 
(in thousands)
September 30, 2019
 
December 31, 2018
Commercial and industrial
$
2,287,722

 
$
2,121,008

Real estate:
 
 
 
Commercial - investor owned
1,247,691

 
843,728

Commercial - owner occupied
660,433

 
604,498

Construction and land development
425,639

 
330,097

Residential
374,162

 
298,944

Total real estate loans
2,707,925

 
2,077,267

Consumer and other
139,090

 
107,351

Loans, before unearned loan fees
5,134,737

 
4,305,626

Unearned loan fees, net
(2,346
)
 
(2,026
)
Loans, including unearned loan fees
$
5,132,391

 
$
4,303,600



A summary of the activity in the allowance for loan losses and the recorded investment in loans by class and category based on impairment methodology through September 30, 2019 and at December 31, 2018, is as follows:
(in thousands)
Commercial and industrial
 
CRE - investor owned
 
CRE -
owner occupied
 
Construction and land development
 
Residential real estate
 
Consumer and other
 
Total
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
$
29,039

 
$
4,683

 
$
4,239

 
$
1,987

 
$
1,616

 
$
731

 
$
42,295

Provision (provision reversal) for loan losses
1,445

 
769

 
(431
)
 
(252
)
 
(288
)
 
233

 
1,476

Losses charged off
(1,853
)
 
(120
)
 
(36
)
 
(45
)
 
(67
)
 
(129
)
 
(2,250
)
Recoveries
29

 
7

 
2

 
9

 
364

 
13

 
424

Balance at March 31, 2019
$
28,660

 
$
5,339


$
3,774


$
1,699


$
1,625


$
848


$
41,945

Provision (provision reversal) for loan losses
1,781

 
364

 
591

 
(216
)
 
(345
)
 
(215
)
 
1,960

Losses charged off
(1,380
)
 
(431
)
 
—

 
—

 
(26
)
 
(53
)
 
(1,890
)
Recoveries
32

 
52

 
6

 
489

 
124

 
217

 
920

Balance at June 30, 2019
$
29,093

 
$
5,324


$
4,371


$
1,972


$
1,378


$
797


$
42,935

Provision (provision reversal) for loan losses
867

 
333

 
419

 
(88
)
 
193

 
109

 
1,833

Losses charged off
(1,295
)
 
—

 
(22
)
 
—

 
(255
)
 
(86
)
 
(1,658
)
Recoveries
209

 
11

 
3

 
260

 
65

 
40

 
588

Balance at September 30, 2019
$
28,874

 
$
5,668


$
4,771


$
2,144


$
1,381


$
860


$
43,698



(in thousands)
Commercial and industrial
 
CRE - investor owned
 
CRE -
owner occupied
 
Construction and land development
 
Residential real estate
 
Consumer and other
 
Total
Balance September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses - Ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
2,023

 
$
258

 
$
—

 
$
—

 
$
116

 
$
11

 
$
2,408

Collectively evaluated for impairment
26,851

 
5,410

 
4,771

 
2,144

 
1,265

 
849

 
41,290

Total
$
28,874

 
$
5,668


$
4,771


$
2,144


$
1,381


$
860


$
43,698

Loans - Ending balance:
 
 
 
 
 
 
 

 
 
 
 
 
 
Individually evaluated for impairment
$
11,433

 
$
2,637

 
$
1,423

 
$
—

 
$
1,267

 
$
11

 
$
16,771

Collectively evaluated for impairment
2,276,289

 
1,245,054

 
659,010

 
425,639

 
372,895

 
136,733

 
5,115,620

Total
$
2,287,722

 
$
1,247,691


$
660,433


$
425,639


$
374,162


$
136,744


$
5,132,391

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses - Ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
4,266

 
$
—

 
$
109

 
$
—

 
$
52

 
$
26

 
$
4,453

Collectively evaluated for impairment
24,773

 
4,683

 
4,130

 
1,987

 
1,564

 
705

 
37,842

Total
$
29,039

 
$
4,683


$
4,239


$
1,987


$
1,616


$
731


$
42,295

Loans - Ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
12,950

 
$
398

 
$
2,135

 
$
—

 
$
2,277

 
$
311

 
$
18,071

Collectively evaluated for impairment
2,108,058

 
843,330

 
602,363

 
330,097

 
296,667

 
105,014

 
4,285,529

Total
$
2,121,008

 
$
843,728


$
604,498


$
330,097


$
298,944


$
105,325


$
4,303,600



A summary of nonperforming loans individually evaluated for impairment by category at September 30, 2019 and December 31, 2018, and the income recognized on impaired loans is as follows:
 
September 30, 2019
(in thousands)
Unpaid
Contractual
Principal Balance
 
Recorded
Investment
With No Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded Investment
 
Related Allowance
 
Average
Recorded Investment
Commercial and industrial
$
24,233

 
$
1,096

 
$
10,337

 
$
11,433

 
$
2,023

 
$
12,429

Real estate:
 
 
 
 
 
 
 
 
 
 
 
    Commercial - investor owned
3,312

 
1,135

 
1,502

 
2,637

 
258

 
2,525

    Commercial - owner occupied
245

 
221

 
—

 
221

 
—

 
27

    Construction and land development
—

 
—

 
—

 
—

 
—

 
—

    Residential
1,388

 
1,021

 
246

 
1,267

 
116

 
1,782

Consumer and other
1

 
—

 
11

 
11

 
11

 
11

Total
$
29,179

 
$
3,473


$
12,096


$
15,569


$
2,408


$
16,774


 
December 31, 2018
(in thousands)
Unpaid
Contractual
Principal Balance
 
Recorded
Investment
With No Allowance
 
Recorded
Investment
With
Allowance
 
Total
Recorded Investment
 
Related Allowance
 
Average
Recorded Investment
Commercial and industrial
$
21,893

 
$
3,294

 
$
9,656

 
$
12,950

 
$
4,266

 
$
13,827

Real estate:
 
 
 
 
 
 
 
 
 
 
 
    Commercial - investor owned
553

 
398

 
—

 
398

 
—

 
277

    Commercial - owner occupied
847

 
472

 
336

 
808

 
109

 
691

    Construction and land development
—

 
—

 
—

 
—

 
—

 
—

    Residential
2,425

 
1,659

 
618

 
2,277

 
52

 
778

Consumer and other
329

 
—

 
312

 
312

 
26

 
—

Total
$
26,047

 
$
5,823


$
10,922


$
16,745


$
4,453


$
15,573



 
Three months ended September 30,
 
Nine months ended September 30,
(in thousands)
2019
 
2018
 
2019
 
2018
Total interest income that would have been recognized under original terms
$
247

 
$
614

 
$
893

 
$
1,615

Total cash received and recognized as interest income on non-accrual loans
77

 
68

 
262

 
157

Total interest income recognized on accruing impaired loans
3

 
110

 
115

 
133



The recorded investment in nonperforming loans by category at September 30, 2019 and December 31, 2018, is as follows: 
 
September 30, 2019
(in thousands)
Non-accrual
 
Restructured, accruing
 
Loans over 90 days past due and still accruing interest
 
Total
Commercial and industrial
$
11,409

 
$
—

 
$
24

 
$
11,433

Real estate:
 
 
 
 
 
 
 
    Commercial - investor owned
2,637

 
—

 
—

 
2,637

    Commercial - owner occupied
221

 
—

 
—

 
221

    Construction and land development
—

 
—

 
—

 
—

    Residential
1,162

 
79

 
26

 
1,267

Consumer and other
1

 
—

 
10

 
11

       Total
$
15,430

 
$
79


$
60


$
15,569


 
December 31, 2018
(in thousands)
Non-accrual
 
Restructured, accruing
 
Total
Commercial and industrial
$
12,805

 
$
145

 
$
12,950

Real estate:
 
 
 
 
 
    Commercial - investor owned
398

 
—

 
398

    Commercial - owner occupied
808

 
—

 
808

    Construction and land development
—

 
—

 
—

    Residential
2,197

 
80

 
2,277

Consumer and other
312

 
—

 
312

       Total
$
16,520

 
$
225

 
$
16,745



There were no loans over 90 days past due and still accruing at December 31, 2018.

There were no loans restructured during the three months ended September 30, 2019. The recorded investment by category for the portfolio loans restructured during the three months ended September 30, 2018, is as follows:
 
September 30, 2018
(in thousands, except for number of loans)
Number of loans
 
Pre-Modification Outstanding Recorded Balance
 
Post-Modification Outstanding Recorded Balance
Commercial and industrial
1

 
$
187

 
$
187

Total
1

 
$
187

 
$
187


The recorded investment by category for the portfolio loans restructured during the nine months ended September 30, 2019 and 2018, is as follows:
 
September 30, 2019
 
September 30, 2018
(in thousands, except for number of loans)
Number of loans
 
Pre-Modification Outstanding Recorded Balance
 
Post-Modification Outstanding Recorded Balance
 
Number of loans
 
Pre-Modification Outstanding Recorded Balance
 
Post-Modification Outstanding Recorded Balance
Commercial and industrial
—

 
$
—

 
$
—

 
1

 
$
187

 
$
187

Real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial - owner occupied
1

 
188

 
188

 
—

 
—

 
—

Residential
2

 
332

 
332

 
—

 
—

 
—

Total
3

 
$
520

 
$
520

 
1

 
$
187

 
$
187



As of September 30, 2019, the Company had $0.6 million in specific reserves allocated to restructured loans totaling $3.3 million.

Restructured loans that subsequently defaulted during the three months ended September 30, 2019 included one commercial and industrial loan with a recorded balance of $0.1 million. Restructured loans that subsequently defaulted for the nine months ended September 30, 2019 included two commercial and industrial loans with an aggregate recorded balance of $0.4 million. There were no troubled debt restructured loans that subsequently defaulted during the three and nine months ended September 30, 2018.
 
 
 
 
 
 
 
 
 
 
 
 
The aging of the recorded investment in past due loans by portfolio class and category at September 30, 2019 and December 31, 2018, is shown below.

 
September 30, 2019
(in thousands)
30-89 Days
 Past Due
 
90 or More
Days
Past Due
 
Total
Past Due
 
Current
 
Total
Commercial and industrial
$
6,913

 
$
7,314

 
$
14,227

 
$
2,273,495

 
$
2,287,722

Real estate:
 
 
 
 
 
 
 
 
 
Commercial - investor owned
2,408

 
2,000

 
4,408

 
1,243,283

 
1,247,691

Commercial - owner occupied
1,166

 
—

 
1,166

 
659,267

 
660,433

Construction and land development
62

 
—

 
62

 
425,577

 
425,639

Residential
2,098

 
1,183

 
3,281

 
370,881

 
374,162

Consumer and other
107

 
—

 
107

 
136,637

 
136,744

Total
$
12,754

 
$
10,497


$
23,251


$
5,109,140


$
5,132,391


 
December 31, 2018
(in thousands)
30-89 Days
 Past Due
 
90 or More
Days
Past Due
 
Total
Past Due
 
Current
 
Total
Commercial and industrial
$
66

 
$
10,257

 
$
10,323

 
$
2,110,685

 
$
2,121,008

Real estate:
 
 
 
 
 
 
 
 
 
Commercial - investor owned
529

 
127

 
656

 
843,072

 
843,728

Commercial - owner occupied
292

 
565

 
857

 
603,641

 
604,498

Construction and land development
6

 
—

 
6

 
330,091

 
330,097

Residential
709

 
897

 
1,606

 
297,338

 
298,944

Consumer and other
—

 
312

 
312

 
105,013

 
105,325

Total
$
1,602

 
$
12,158


$
13,760


$
4,289,840


$
4,303,600



The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•
Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•
Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•
Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•
Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•
Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.
•
Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•
Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.
The recorded investment by risk category of the loans by portfolio class and category at September 30, 2019, which is based upon the most recent analysis performed, and December 31, 2018, is as follows:
 
September 30, 2019
(in thousands)
Pass (1-6)
 
Watch (7)
 
Classified (8 & 9)
 
Total
Commercial and industrial
$
2,091,433

 
$
120,930

 
$
75,359

 
$
2,287,722

Real estate:
 
 
 
 
 
 
 
Commercial - investor owned
1,226,499

 
17,552

 
3,640

 
1,247,691

Commercial - owner occupied
625,365

 
28,763

 
6,305

 
660,433

Construction and land development
418,357

 
7,179

 
103

 
425,639

Residential
368,241

 
3,333

 
2,588

 
374,162

Consumer and other
136,738

 
—

 
6

 
136,744

Total
$
4,866,633

 
$
177,757

 
$
88,001

 
$
5,132,391


 
December 31, 2018
(in thousands)
Pass (1-6)
 
Watch (7)
 
Classified (8 & 9)
 
Total
Commercial and industrial
$
1,927,782

 
$
146,033

 
$
47,193

 
$
2,121,008

Real estate:
 
 
 
 
 
 
 
Commercial - investor owned
823,128

 
15,083

 
5,517

 
843,728

Commercial - owner occupied
563,003

 
31,834

 
9,661

 
604,498

Construction and land development
318,451

 
11,580

 
66

 
330,097

Residential
287,802

 
4,232

 
6,910

 
298,944

Consumer and other
105,007

 
6

 
312

 
105,325

Total
$
4,025,173

 
$
208,768


$
69,659

 
$
4,303,600