
	December 31, 2019										December 31, 2018
	PCI Loans		All Other Loans		Total		PCI Loans		All Other Loans		Total
Commercial real estate	$	15,255	$	890,051	$	905,306	$	17,682	$	842,345	$	860,027
Consumer real estate	6,541		416,797		423,338		8,712		398,542		407,254
Construction and land development	4,458		223,168		227,626		4,602		183,293		187,895
Commercial and industrial	407		336,668		337,075		2,557		305,697		308,254
Consumer and other	326		9,577		9,903		605		13,204		13,809
Total loans	26,987		1,876,261		1,903,248		34,158		1,743,081		1,777,239
Less: Allowance for loan losses	(156)		(10,087)		(10,243)		—		(8,275)		(8,275)

Loans, net	$	26,831	$	1,866,174	$	1,893,005	$	34,158	$	1,734,806	$	1,768,964

For purposes of the disclosures required pursuant to the adoption of ASC 310, the loan portfolio was disaggregated into segments. A portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. There are five loan portfolio segments that include commercial real estate, consumer real estate, construction and land development, commercial and industrial, and consumer and other.

Commercial Real Estate: Commercial real estate loans include owner-occupied commercial real estate loans and loans secured by income-producing properties. Owner-occupied commercial real estate loans to operating businesses are long-term financing of land and buildings. These loans are repaid by cash flow generated from the business operation. Real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Consumer Real Estate: Consumer real estate loans include real estate loans secured by first liens, second liens, or open end real estate loans, such as home equity lines. These are repaid by various means such as a borrower's income, sale of the property, or rental income derived from the property. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Construction and Land Development: Loans for real estate construction and development are repaid through cash flow related to the operations, sale or refinance of the underlying property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of the real estate or income generated from the real estate collateral. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Commercial and Industrial: The commercial and industrial loan portfolio segment includes commercial and financial loans. These loans include those loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or expansion projects. Loans are repaid by business cash flows. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrower, particularly cash flows from the customers' business operations.

Consumer and Other: The consumer loan portfolio segment includes direct consumer installment loans, overdrafts and other revolving credit loans, and educational loans. Loans in this portfolio are sensitive to unemployment and other key consumer economic measures.

The Company employs a credit risk management process with defined policies, accountability and routine reporting to manage credit risk in the loan portfolio segments. Credit risk management is guided by credit policies that provide for a consistent and prudent approach to underwriting and approvals of credits. Within the Credit Policy, procedures exist that elevate the approval requirements as credits become larger and more complex. All loans are individually underwritten, risk-rated, approved, and monitored.

Responsibility and accountability for adherence to underwriting policies and accurate risk ratings lies in each portfolio segment. For the consumer real estate and consumer and other portfolio segments, the risk management process focuses on managing customers who become delinquent in their payments. For the other portfolio segments, the risk management process focuses on underwriting new business and, on an ongoing basis, monitoring the credit of the portfolios, including a third party review of the largest credits on an annual basis or more frequently as needed. To ensure problem credits are identified on a timely basis, several specific portfolio reviews occur periodically to assess the larger adversely rated credits for proper risk rating and accrual status.

The allowance for loan losses is a valuation reserve established through provisions for loan losses charged against income. The allowance for loan losses, which is evaluated quarterly, is maintained at a level that management deems sufficient to absorb probable losses inherent in the loan portfolio. Loans deemed to be uncollectible are charged against the allowance for loan losses, while recoveries of previously charged-off amounts are credited to the allowance for loan losses. The allowance for loan losses is comprised of specific valuation allowances for loans evaluated individually for impairment and general allocations for pools of homogeneous loans with similar risk characteristics and trends.

The allowance for loan losses related to specific loans is based on management's estimate of potential losses on impaired loans as determined by (1) the present value of expected future cash flows; (2) the fair value of collateral if the loan is determined to be collateral dependent or (3) the loan's observable market price. The Company's homogeneous loan pools include commercial real estate loans, consumer real estate loans, construction and land development loans, commercial and industrial loans, and consumer and other loans. The general allocations to these loan pools are based on the historical loss rates for specific loan types and the internal risk grade, if applicable, adjusted for both internal and external qualitative risk factors.

The qualitative factors considered by management include, among other factors, (1) changes in local and national economic conditions; (2) changes in asset quality; (3) changes in loan portfolio volume; (4) the composition and concentrations of credit; (5) the impact of competition on loan structuring and pricing; (6) the impact of interest rate changes on portfolio risk and (7) effectiveness of the Company's loan policies, procedures and internal controls. The total allowance established for each homogeneous loan pool represents the product of the historical loss ratio adjusted for qualitative factors and the total dollar amount of the loans in the pool.

The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.

The Company's loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Company has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent on local economic conditions.

While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Company to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term.


	December 31, 2019
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	889,795	$	415,250	$	222,621	$	336,508	$	9,577	$	1,873,751
Impaired loans	256		1,547		547		160		—		2,510
	890,051		416,797		223,168		336,668		9,577		1,876,261
PCI loans	15,255		6,541		4,458		407		326		26,987
Total	$	905,306	$	423,338	$	227,626	$	337,075	$	9,903	$	1,903,248


	December 31, 2018
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Performing loans	$	841,709	$	397,306	$	182,746	$	304,673	$	13,088	$	1,739,522
Impaired loans	636		1,236		547		1,024		116		3,559
	842,345		398,542		183,293		305,697		13,204		1,743,081
PCI loans	17,682		8,712		4,602		2,557		605		34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239


	December 31, 2019
					Construction		Commercial		Consumer
	Commercial		Consumer		and Land		and		and
	Real Estate		Real Estate		Development		Industrial		Other		Total
Performing loans	$	4,491	$	2,159	$	1,127	$	1,766	$	69	$	9,612
Impaired loans	—		343		—		132		—		475
	4,491		2,502		1,127		1,898		69		10,087
PCI loans	17		74		—		59		6		156
Total	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243


	December 31, 2018
					Construction		Commercial		Consumer
	Commercial		Consumer		and Land		and		and
	Real Estate		Real Estate		Development		Industrial		Other		Total
Performing loans	$	3,639	$	1,763	$	795	$	1,304	$	240	$	7,741
Impaired loans	—		26		—		442		66		534
	3,639		1,789		795		1,746		306		8,275
PCI loans	—		—		—		—		—		—
Total	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275


	December 31, 2019
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Beginning balance	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275
Loans charged off	(36)		(4)		—		(659)		(344)		(1,043)
Recoveries of loans charged off	65		164		8		77		98		412
Provision for loan losses	840		627		324		793		15		2,599
Ending balance	$	4,508	$	2,576	$	1,127	$	1,957	$	75	$	10,243


	December 31, 2018
	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Beginning balance	$	2,465	$	1,596	$	521	$	1,062	$	216	$	5,860
Loans charged off	(38)		(275)		—		(177)		(370)		(860)
Recoveries of loans charged off	2		100		9		72		156		339
Provision for loan losses	1,210		368		265		789		304		2,936
Ending balance	$	3,639	$	1,789	$	795	$	1,746	$	306	$	8,275

Pass: Loans in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan obligations. Loans in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the debt if required, for any weakness that may exist.

Watch: Loans in this risk category involve borrowers that exhibit characteristics, or are operating under conditions that, if not successfully mitigated as planned, have a reasonable risk of resulting in a downgrade within the next six to twelve months. Loans may remain in this risk category for six months and then are either upgraded or downgraded upon subsequent evaluation.

Special Mention: Loans in this risk grade are the equivalent of the regulatory definition of "Other Assets Especially Mentioned" classification. Loans in this category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and /or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the asset or in the Company's credit position.

Substandard: Loans in this risk grade are inadequately protected by the borrower's current financial condition and payment capability or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined.

Uncollectible: Loans in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Charge-offs against the allowance for loan losses are taken in the period in which the loan becomes uncollectible. Consequently, the Company typically does not maintain a recorded investment in loans within this category.


	December 31, 2019
Non PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	860,447	$	413,192	$	216,459	$	328,564	$	9,462	$	1,828,124
Watch	25,180		989		6,089		6,786		40		39,084
Special mention	4,057		738		—		1,033		—		5,828
Substandard	367		1,713		620		228		51		2,979
Doubtful	—		165		—		57		24		246
Total	$	890,051	$	416,797	$	223,168	$	336,668	$	9,577	$	1,876,261


	December 31, 2019
PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	12,473	$	5,258	$	902	$	41	$	300	$	18,974
Watch	2,234		38		3,556		—		13		5,841
Special mention	139		60		—		—		—		199
Substandard	409		1,185		—		366		13		1,973
Doubtful	—		—		—		—		—		—
Total	$	15,255	$	6,541	$	4,458	$	407	$	326	$	26,987
Total loans	$	905,306	$	423,338	$	227,626	$	337,075	$	9,903	$	1,903,248


	December 31, 2018
Non PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	834,912	$	394,728	$	182,524	$	303,805	$	12,927	$	1,728,896
Watch	6,791		2,678		64		1,090		135		10,758
Special mention	—		14		158		137		—		309
Substandard	642		1,122		547		462		142		2,915
Doubtful	—		—		—		203		—		203
Total	$	842,345	$	398,542	$	183,293	$	305,697	$	13,204	$	1,743,081


	December 31, 2018
PCI Loans	Commercial Real Estate		Consumer Real Estate		Construction and Land Development		Commercial and Industrial		Consumer and Other		Total
Pass	$	14,050	$	5,617	$	4,033	$	2,382	$	541	$	26,623
Watch	1,805		756		569		—		17		3,147
Special mention	1,030		446		—		50		10		1,536
Substandard	797		1,893		—		125		37		2,852
Doubtful	—		—		—		—		—		—
Total	$	17,682	$	8,712	$	4,602	$	2,557	$	605	$	34,158
Total loans	$	860,027	$	407,254	$	187,895	$	308,254	$	13,809	$	1,777,239

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. Generally, management places a loan on nonaccrual when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due.


	December 31, 2019
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	466	$	22	$	—	$	124	$	612	$	15,255	$	889,439	$	905,306
Consumer real estate	1,564		30		—		1,872		3,466		6,541		413,331		423,338
Construction and land development	507		—		607		620		1,734		4,458		221,434		227,626
Commercial and industrial	559		—		—		57		669		407		335,999		337,075
Consumer and other	86		—		—		70		170		326		9,407		9,903
Total	$	3,182	$	119	$	607	$	2,743	$	6,651	$	26,987	$	1,869,610	$	1,903,248


	December 31, 2018
	30-60 Days Past Due and Accruing		61-89 Days Past Due and Accruing		Past Due 90 Days or More and Accruing		Nonaccrual		Total Past Due		PCI Loans		Current Loans		Total Loans
Commercial real estate	$	377	$	19	$	—	$	272	$	668	$	17,682	$	841,677	$	860,027
Consumer real estate	1,168		462		454		844		2,928		8,712		395,614		407,254
Construction and land development	343		—		—		547		890		4,602		182,403		187,895
Commercial and industrial	155		—		101		909		1,165		2,557		304,532		308,254
Consumer and other	117		—		29		124		270		605		12,934		13,809
Total	$	2,160	$	481	$	584	$	2,696	$	5,921	$	34,158	$	1,737,160	$	1,777,239

A loan held for investment is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both principal and interest) according to the terms of the loan agreement.



	December 31, 2019										December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
Impaired loans without a valuation allowance:
Commercial real estate	$	256	$	261	$	—	$	636	$	648	$	—
Consumer real estate	553		553		—		1,073		1,089		—
Construction and land development	547		547		—		547		547		—
Commercial and industrial	—		—		—		69		70		—
Consumer and other	—		—		—		29		33		—
	1,356		1,361		—		2,354		2,387		—

Impaired loans with a valuation allowance:
Commercial real estate	—		—		—		—		—		—
Consumer real estate	994		994		343		163		205		26
Construction and land development	—		—		—		—		—		—
Commercial and industrial	160		160		132		955		973		442
Consumer and other	—		—		—		87		87		66
	1,154		1,154		475		1,205		1,265		534
PCI loans:
Commercial real estate	17		99		17		—		—		—
Consumer real estate	1,205		1,371		74		—		—		—
Construction and land development	—		—		—		—		—		—
Commercial and industrial	396		534		59		—		—		—
Consumer and other	45		51		6		—		—		—
	1,663		2,055		156		—		—		—

Total impaired loans	$	4,173	$	4,570	$	631	$	3,559	$	3,652	$	534



	December 31, 2019						December 31, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Impaired loans without a valuation allowance:
Commercial real estate	$	399	$	30	$	855	$	33
Consumer real estate	725		15		934		29
Construction and land development	619		5		547		—
Commercial and industrial	20		1		69		6
Consumer and other	11		1		15		3
	1,774		52		2,420		71

Impaired loans with a valuation allowance:
Commercial real estate	9		1		—		—
Consumer real estate	397		17		365		—
Construction and land development	11		—		—		—
Commercial and industrial	430		16		476		37
Consumer and other	23		—		86		3
	870		34		927		40
PCI loans:
Commercial real estate	1,518		(25)		11		—
Consumer real estate	922		42		—		—
Construction and land development	—		—		—		—
Commercial and industrial	79		9		—		—
Consumer and other	9		1		—		—
	2,528		27		11		—

Total impaired loans	$	5,172	$	113	$	3,358	$	111

At December 31, 2019 and 2018, impaired loans included loans that were classified as Troubled Debt Restructurings ("TDRs"). The restructuring of a loan is considered a TDR if both (i) the borrower is experiencing financial difficulties and (ii) the creditor has granted a concession.

In assessing whether or not a borrower is experiencing financial difficulties, the Company considers information currently available regarding the financial condition of the borrower. This information includes, but is not limited to, whether (i) the debtor is currently in payment default on any of its debt; (ii) a payment default is probable in the foreseeable future without the modification; (iii) the debtor has declared or is in the process of declaring bankruptcy; and (iv) the debtor's projected cash flow is sufficient to satisfy contractual payments due under the original terms of the loan without a modification.

The Company considers all aspects of the modification to loan terms to determine whether or not a concession has been granted to the borrower. Key factors considered by the Company include the debtor's ability to access funds at a market rate for debt with similar risk characteristics, the significance of the modification relative to unpaid principal balance or collateral value of the debt, and the significance of a delay in the timing of payments relative to the original contractual terms of the loan.

The most common concessions granted by the Company generally include one or more modifications to the terms of the debt, such as (i) a reduction in the interest rate for the remaining life of the debt; (ii) an extension of the maturity date at an interest rate lower than the current market rate for new debt with similar risk; (iii) a temporary period of interest-only payments; and (iv) a reduction in the contractual payment amount for either a short period or remaining term of the loan. As of December 31, 2019 and 2018, management had approximately $61 thousand and $116 thousand , respectively, in loans that met the criteria for restructured. No restructured loans were on nonaccrual as of December 31, 2019 and 2018. A loan is placed back on accrual status when both principal and interest are current and it is probable that management will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

The Company has acquired loans which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans at for the years ended December 31, 2019 and 2018 is as follows (in thousands):


	2019		2018
Commercial real estate	$	21,570	$	24,849
Consumer real estate	8,411		11,108
Construction and land development	5,394		5,731
Commercial and industrial	2,540		5,824
Consumer and other	504		892
Total loans	38,419		48,404
Less remaining purchase discount	(11,432)		(14,246)
Total loans, net of purchase discount	26,987		34,158
Less: Allowance for loan losses	(156)		—
Carrying amount, net of allowance	$	26,831	$	34,158


	2019		2018
Accretable yield, beginning of period	$	7,052	$	9,287
Additions	—		2,416
Accretion income	(4,627)		(5,368)
Reclassification from nonaccretable	3,555		1,494
Other changes, net	2,474		(777)
Accretable yield, end of period	$	8,454	$	7,052

There were $156 thousand allowance for loan losses on purchase credit impaired loans at the year ended December 31, 2019. There were no allowance for loan losses on purchase credit impaired loans at the year ended December 31, 2018.

Purchased credit impaired loans acquired from TN Bancshares during the year ended December 31, 2018 for which it was probable at acquisition that all contractually required payments would not be collected are as follows (in thousands):

Purchased credit impaired loans acquired from Foothills Bancorp during the year ended December 31, 2018 for which it was probable at acquisition that all contractually required payments would not be collected are as follows (in thousands):

In the ordinary course of business, the Company has granted loans to certain related interests, including directors, executive officers, and their affiliates (collectively referred to as "related parties"). Such loans are made in the ordinary course of business and on substantially the same terms as those for comparable transactions prevailing at the time and do not present other unfavorable features. A summary of activity in loans to related parties is as follows (in thousands):