Loans

Information pertaining to portfolio loans, purchased credit impaired (“PCI”) loans, and purchased unimpaired loans (“PUL”) is as follows:



	March 31, 2019
(In thousands)	Portfolio Loans		PCI Loans		PULs		Total
Construction and land development	$	308,846	$	153	$	108,566	$	417,565
Commercial real estate	1,478,955		10,393		673,069		2,162,417
Residential real estate	1,077,523		2,575		249,068		1,329,166
Commercial and financial	606,179		667		106,033		712,879
Consumer	195,719		—		10,695		206,414
Totals¹	$	3,667,222	$	13,788	$	1,147,431	$	4,828,441



	December 31, 2018
(In thousands)	Portfolio Loans		PCI Loans		PULs		Total
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
Totals¹	$	3,588,251	$	14,434	$	1,222,529	$	4,825,214

¹Net loan balances as of March 31, 2019 and December 31, 2018 include deferred costs of $17.8 million and $16.9 million for each period, respectively.

The following tables present the contractual delinquency of the recorded investment by class of loans as of:



	March 31, 2019
(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing Receivables
Portfolio Loans
Construction and land development	$	308,819	$	—	$	—	$	—	$	27	$	308,846
Commercial real estate	1,471,607		1,016		709		255		5,368		1,478,955
Residential real estate	1,068,869		612		65		—		7,977		1,077,523
Commercial and financial	599,068		3,724		1,350		81		1,956		606,179
Consumer	194,672		529		423		—		95		195,719
Total Portfolio Loans	3,643,035		5,881		2,547		336		15,423		3,667,222

Purchased Unimpaired Loans
Construction and land development	108,566		—		—		—		—		108,566
Commercial real estate	671,195		536		—		—		1,338		673,069
Residential real estate	246,583		1,288		—		428		769		249,068
Commercial and financial	104,229		—		—		—		1,804		106,033
Consumer	10,664		—		—		—		31		10,695
Total PULs	1,141,237		1,824		—		428		3,942		1,147,431

Purchased Credit Impaired Loans
Construction and land development	138		—		—		—		15		153
Commercial real estate	9,395		—		—		—		998		10,393
Residential real estate	558		—		—		—		2,017		2,575
Commercial and financial	649		—		—		—		18		667
Consumer	—		—		—		—		—		—
Total PCI Loans	10,740		—		—		—		3,048		13,788

Total Loans	$	4,795,012	$	7,705	$	2,547	$	764	$	22,413	$	4,828,441



	December 31, 2018
(In thousands)	Current		Accruing 30-59 Days Past Due		Accruing 60-89 Days Past Due		Accruing Greater Than 90 Days		Nonaccrual		Total Financing 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

Purchased Unimpaired Loans
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

Purchased Credit Impaired 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 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 problem loans 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 weakness present makes 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 based on the most recent analysis performed as of:



	March 31, 2019
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total
Construction and land development	$	406,010	$	11,262	$	293	$	—	$	417,565
Commercial real estate	2,080,415		57,732		24,270		—		2,162,417
Residential real estate	1,304,847		3,953		20,366		—		1,329,166
Commercial and financial	696,837		9,013		7,029		—		712,879
Consumer	202,187		3,150		1,077		—		206,414
Totals	$	4,690,296	$	85,110	$	53,035	$	—	$	4,828,441



	December 31, 2018
(In thousands)	Pass		Special Mention		Substandard		Doubtful		Total
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
Totals	$	4,694,297	$	67,296	$	63,596	$	25	$	4,825,214

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 non-accretable difference.

The table below summarizes the changes in accretable yield on PCI loans for the periods ended:



	Three Months Ended March 31,
(In thousands)	2019			2018
Beginning balance	$	2,924		$	3,699
Additions	—			—
Deletions	—			(43		)
Accretion	(776		)	(443		)
Reclassification from non-accretable difference	460			339
Ending balance	$	2,608		$	3,552

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 three months ended March 31, 2019, two loans were modified in a TDR totaling $2.0 million. There were no loans modified in a TDR during the three months ended March 31, 2018. No accruing loans that were restructured within the twelve months preceding March 31, 2019 defaulted during the twelve months ended March 31, 2019.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 March 31, 2019 and December 31, 2018, the Company’s recorded investment in impaired loans, excluding PCI loans, the unpaid principal balance and related valuation allowance was as follows:



	March 31, 2019
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation Allowance
Impaired Loans with No Related Allowance Recorded:
Construction and land development	$	15	$	221	$	—
Commercial real estate	5,136		6,406		—
Residential real estate	10,294		14,873		—
Commercial and financial	2,036		3,103		—
Consumer	146		158		—
Impaired Loans with an Allowance Recorded:
Construction and land development	183		197		20
Commercial real estate	9,624		12,791		353
Residential real estate	5,688		5,820		577
Commercial and financial	2,024		2,020		1,329
Consumer	256		268		91
Total Impaired Loans
Construction and land development	198		418		20
Commercial real estate	14,760		19,197		353
Residential real estate	15,982		20,693		577
Commercial and financial	4,060		5,123		1,329
Consumer	402		426		91
Totals	$	35,402	$	45,857	$	2,370



	December 31, 2018
(In thousands)	Recorded Investment		Unpaid Principal Balance		Related Valuation 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
Totals	$	36,700	$	46,545	$	2,728

Impaired loans also include TDRs where concessions have been granted to borrowers who have experienced financial difficulty. At March 31, 2019 and at December 31, 2018, accruing TDRs totaled $14.9 million and $13.3 million, respectively.

Average impaired loans for the three months ended March 31, 2019 and 2018 were $36.3 million and $31.1 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 three months ended March 31, 2019, and 2018, the Company recorded interest income on impaired loans of $0.4 million and $0.4 million, respectively.

For impaired loans whose impairment is measured based on the present value of expected future cash flows, interest income represents the change in present value attributable to the passage of time, and totaled $35,000 and $88,000, for the three months ended March 31, 2019 and 2018, respectively