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Loans Receivable, Net
 9 Months Ended
Sep. 30, 2018
Receivables [Abstract]  
Loans Receivable, Net
Loans Receivable, Net
Loans receivable, net at September 30, 2018 and December 31, 2017 consisted of the following (in thousands):
 
September 30, 2018
 
December 31, 2017
Commercial:
 
 
 
Commercial and industrial
$
342,555

 
$
187,645

Commercial real estate – owner occupied
734,720

 
569,497

Commercial real estate – investor
2,011,897

 
1,186,302

Total commercial
3,089,172

 
1,943,444

Consumer:
 
 
 
Residential real estate
2,019,918

 
1,748,590

Home equity loans and lines
358,728

 
281,143

Other consumer
74,555

 
1,225

Total consumer
2,453,201

 
2,030,958

 
5,542,373

 
3,974,402

Purchased credit impaired (“PCI”) loans
9,700

 
1,712

Total Loans
5,552,073

 
3,976,114

Deferred origination costs, net
8,707

 
5,380

Allowance for loan losses
(16,821
)
 
(15,721
)
Total loans, net
$
5,543,959

 
$
3,965,773


 
At September 30, 2018 and December 31, 2017, loans in the amount of $19.2 million and $20.9 million, respectively, were three or more months delinquent or in the process of foreclosure and the Company was not accruing interest income on these loans. At September 30, 2018, there were no loans that were ninety days or greater past due and still accruing interest. Non-accrual loans include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.
The recorded investment in mortgage and consumer loans collateralized by residential real estate, which are in the process of foreclosure, amounted to $2.1 million at September 30, 2018. The amount of foreclosed residential real estate property held by the Company was $447,000 at September 30, 2018.
The Company defines an impaired loan as non-accrual commercial real estate, multi-family, land, construction and commercial loans in excess of $250,000. Impaired loans also include all loans modified as troubled debt restructurings. At September 30, 2018, the impaired loan portfolio totaled $33.1 million for which there was no specific allocation in the allowance for loan losses. At December 31, 2017, the impaired loan portfolio totaled $47.0 million for which there was no specific allocation in the allowance for loan losses. The average balance of impaired loans for the three and nine months ended September 30, 2018 was $32.9 million and $39.2 million, respectively, and for the three and nine months ended September 30, 2017 was $43.1 million and $38.0 million, respectively.
An analysis of the allowance for loan losses for the three and nine months ended September 30, 2018 and 2017 is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2018
 
2017
 
2018
 
2017
Balance at beginning of period
$
16,691

 
$
16,557

 
$
15,721

 
$
15,183

Provision charged to operations
907

 
1,165

 
2,984

 
3,030

Charge-offs
(891
)
 
(1,357
)
 
(2,708
)
 
(2,861
)
Recoveries
114

 
219

 
824

 
1,232

Balance at end of period
$
16,821

 
$
16,584

 
$
16,821

 
$
16,584



The following table presents an analysis of the allowance for loan losses for the three and nine months ended September 30, 2018 and 2017 and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2018 and December 31, 2017, excluding PCI loans (in thousands):

 
Commercial
and 
Industrial
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 
Residential
Real Estate
 
Consumer
 
Unallocated
 
Total
For the three months ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
2,080

 
$
2,340

 
$
9,058

 
$
2,126

 
$
526

 
$
561

 
$
16,691

Provision (benefit) charged to operations
(520
)
 
187

 
661

 
578

 
57

 
(56
)
 
907

Charge-offs
(146
)
 
—

 
(138
)
 
(535
)
 
(72
)
 
—

 
(891
)
Recoveries
28

 
1

 
9

 
57

 
19

 
—

 
114

Balance at end of period
$
1,442

 
$
2,528

 
$
9,590

 
$
2,226

 
$
530

 
$
505

 
$
16,821

For the three months ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
2,253

 
$
3,097

 
$
8,367

 
$
1,492

 
$
930

 
$
418

 
$
16,557

Provision (benefit) charged to operations
(180
)
 
119

 
81

 
1,465

 
(122
)
 
(198
)
 
1,165

Charge-offs
(6
)
 
—

 
—

 
(1,284
)
 
(67
)
 
—

 
(1,357
)
Recoveries
50

 
—

 
24

 
128

 
17

 
—

 
219

Balance at end of period
$
2,117

 
$
3,216

 
$
8,472

 
$
1,801

 
$
758

 
$
220

 
$
16,584

For the nine months ended September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,801

 
$
3,175

 
$
7,952

 
$
1,804

 
$
614

 
$
375

 
$
15,721

Provision (benefit) charged to operations
(238
)
 
(734
)
 
2,706

 
1,079

 
41

 
130

 
2,984

Charge-offs
(202
)
 
(91
)
 
(1,239
)
 
(936
)
 
(240
)
 
—

 
(2,708
)
Recoveries
81

 
178

 
171

 
279

 
115

 
—

 
824

Balance at end of period
$
1,442

 
$
2,528

 
$
9,590

 
$
2,226

 
$
530

 
$
505

 
$
16,821

For the nine months ended September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
2,037

 
$
2,999

 
$
6,361

 
$
2,245

 
$
1,110

 
$
431

 
$
15,183

Provision (benefit) charged to operations
(221
)
 
167

 
2,164

 
1,477

 
(346
)
 
(211
)
 
3,030

Charge-offs
(94
)
 
(73
)
 
(84
)
 
(2,485
)
 
(125
)
 
—

 
(2,861
)
Recoveries
395

 
123

 
31

 
564

 
119

 
—

 
1,232

Balance at end of period
$
2,117

 
$
3,216

 
$
8,472

 
$
1,801

 
$
758

 
$
220

 
$
16,584

September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Collectively evaluated for impairment
1,442

 
2,528

 
9,590

 
2,226

 
530

 
505

 
16,821

Total ending allowance balance
$
1,442

 
$
2,528

 
$
9,590

 
$
2,226

 
$
530

 
$
505

 
$
16,821

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
1,738

 
$
5,446

 
$
12,760

 
$
10,454

 
$
2,690

 
$
—

 
$
33,088

Loans collectively evaluated for impairment
340,817

 
729,274

 
1,999,137

 
2,009,464

 
430,593

 
—

 
5,509,285

Total ending loan balance
$
342,555

 
$
734,720

 
$
2,011,897

 
$
2,019,918

 
$
433,283

 
$
—

 
$
5,542,373


 
Commercial
and 
Industrial
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 
Residential
Real Estate
 
Consumer
 
Unallocated
 
Total
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Collectively evaluated for impairment
1,801

 
3,175

 
7,952

 
1,804

 
614

 
375

 
15,721

Total ending allowance balance
$
1,801

 
$
3,175

 
$
7,952

 
$
1,804

 
$
614

 
$
375

 
$
15,721

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
864

 
$
15,132

 
$
17,923

 
$
10,605

 
$
2,464

 
$
—

 
$
46,988

Loans collectively evaluated for impairment
186,781

 
554,365

 
1,168,379

 
1,737,985

 
279,904

 
—

 
3,927,414

Total ending loan balance
$
187,645

 
$
569,497

 
$
1,186,302

 
$
1,748,590

 
$
282,368

 
$
—

 
$
3,974,402



A summary of impaired loans at September 30, 2018, and December 31, 2017, is as follows, excluding PCI loans (in thousands):
 
 
September 30, 2018
 
December 31, 2017
Impaired loans with no allocated allowance for loan losses
$
33,088

 
$
46,988

Impaired loans with allocated allowance for loan losses
—

 
—

 
$
33,088

 
$
46,988

Amount of the allowance for loan losses allocated
$
—

 
$
—


At September 30, 2018, impaired loans included troubled debt restructured (“TDR”) loans of $27.8 million, of which $24.2 million were performing in accordance with their restructured terms for a minimum of six months and were accruing interest. At December 31, 2017, impaired loans included TDR loans of $42.1 million, of which $33.3 million were performing in accordance with their restructured terms for a minimum of six months and were accruing interest.
The summary of loans individually evaluated for impairment by loan portfolio segment as of September 30, 2018, and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017, is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
As of September 30, 2018
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Commercial and industrial
$
1,824

 
$
1,738

 
$
—

Commercial real estate – owner occupied
5,459

 
5,446

 
—

Commercial real estate – investor
15,290

 
12,760

 
—

Residential real estate
10,828

 
10,454

 
—

Consumer
3,009

 
2,690

 
—

 
$
36,410

 
$
33,088

 
$
—

With an allowance recorded:
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
—

 
—

 
—

Commercial real estate – investor
—

 
—

 
—

Residential real estate
—

 
—

 
—

Consumer
—

 
—

 
—

 
$
—

 
$
—

 
$
—

As of December 31, 2017
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Commercial and industrial
$
895

 
$
864

 
$
—

Commercial real estate – owner occupied
15,832

 
15,132

 
—

Commercial real estate – investor
19,457

 
17,923

 
—

Residential real estate
10,951

 
10,605

 
—

Consumer
2,941

 
2,464

 
—

 
$
50,076

 
$
46,988

 
$
—

With an allowance recorded:
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
—

 
—

 
—

Commercial real estate – investor
—

 
—

 
—

Residential real estate
—

 
—

 
—

Consumer
—

 
—

 
—

 
$
—

 
$
—

 
$
—

 
Three Months Ended September 30,
 
2018
 
2017
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
982

 
$
69

 
$
908

 
$
26

Commercial real estate – owner occupied
5,484

 
75

 
11,217

 
335

Commercial real estate – investor
12,191

 
102

 
11,147

 
240

Residential real estate
10,741

 
119

 
12,791

 
128

Consumer
2,782

 
33

 
2,495

 
36

 
$
32,180

 
$
398

 
$
38,558

 
$
765

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
736

 
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
—

 
—

 
—

 
—

Commercial real estate – investor
—

 
—

 
4,551

 
13

Residential real estate
—

 
—

 
—

 
—

Consumer
—

 
—

 
—

 
—

 
$
736

 
$
—

 
$
4,551

 
$
13

 
Nine Months Ended September 30,
 
2018
 
2017
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
906

 
$
85

 
$
588

 
$
50

Commercial real estate – owner occupied
8,978

 
226

 
11,080

 
520

Commercial real estate – investor
14,259

 
304

 
6,550

 
487

Residential real estate
10,873

 
356

 
11,009

 
401

Consumer
2,629

 
116

 
2,368

 
106

 
$
37,645

 
$
1,087

 
$
31,595

 
$
1,564

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
736

 
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
—

 
—

 
—

 
—

Commercial real estate – investor
838

 
—

 
4,233

 
81

Residential real estate
—

 
—

 
1,981

 
62

Consumer
—

 
—

 
148

 
6

 
$
1,574

 
$
—

 
$
6,362

 
$
149

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of September 30, 2018 and December 31, 2017, excluding PCI loans (in thousands):
 
September 30, 2018
 
December 31, 2017
Commercial and industrial
$
1,727

 
$
503

Commercial real estate – owner occupied
511

 
5,962

Commercial real estate – investor
8,082

 
8,281

Residential real estate
6,390

 
4,190

Consumer
2,529

 
1,929

 
$
19,239

 
$
20,865


 
The following table presents the aging of the recorded investment in past due loans as of September 30, 2018 and December 31, 2017 by loan portfolio segment, excluding PCI loans (in thousands):
 
30-59
Days
Past Due
 
60-89
Days
Past Due
 
Greater
than
90 Days
Past Due
 
Total
Past Due
 
Loans Not
Past Due
 
Total
September 30, 2018
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
55

 
$
37

 
$
28

 
$
120

 
$
342,435

 
$
342,555

Commercial real estate – owner occupied
3,433

 
876

 
197

 
4,506

 
730,214

 
734,720

Commercial real estate – investor
2,788

 
666

 
7,938

 
11,392

 
2,000,505

 
2,011,897

Residential real estate
11,674

 
6,462

 
3,567

 
21,703

 
1,998,215

 
2,019,918

Consumer
1,720

 
776

 
2,120

 
4,616

 
428,667

 
433,283

 
$
19,670

 
$
8,817

 
$
13,850

 
$
42,337

 
$
5,500,036

 
$
5,542,373

December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,694

 
$
36

 
$
503

 
$
3,233

 
$
184,412

 
$
187,645

Commercial real estate – owner occupied
222

 
—

 
5,402

 
5,624

 
563,873

 
569,497

Commercial real estate – investor
135

 
1,426

 
4,507

 
6,068

 
1,180,234

 
1,186,302

Residential real estate
13,197

 
2,351

 
3,372

 
18,920

 
1,729,670

 
1,748,590

Consumer
1,067

 
310

 
1,687

 
3,064

 
279,304

 
282,368

 
$
17,315

 
$
4,123

 
$
15,471

 
$
36,909

 
$
3,937,493

 
$
3,974,402


The Company categorizes all commercial and commercial real estate loans, except for small business loans, into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation and current economic trends, among other factors. The Company uses the following definitions for risk ratings:
Pass: Loans classified as Pass are well protected by the paying capacity and net worth of the borrower.
Special Mention: Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.
Substandard: Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful: Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
As of September 30, 2018 and December 31, 2017, and based on the most recent analysis performed, the risk category of loans by loan portfolio segment follows, excluding PCI loans (in thousands) is as follows: 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
September 30, 2018
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
330,996

 
$
423

 
$
11,136

 
$
—

 
$
342,555

Commercial real estate – owner occupied
709,902

 
2,202

 
22,616

 
—

 
734,720

Commercial real estate – investor
1,955,483

 
23,180

 
33,234

 
—

 
2,011,897

 
$
2,996,381

 
$
25,805

 
$
66,986

 
$
—

 
$
3,089,172

December 31, 2017
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
181,438

 
$
3,153

 
$
3,054

 
$
—

 
$
187,645

Commercial real estate – owner occupied
546,569

 
4,337

 
18,591

 
—

 
569,497

Commercial real estate – investor
1,146,630

 
14,644

 
25,028

 
—

 
1,186,302

 
$
1,874,637

 
$
22,134

 
$
46,673

 
$
—

 
$
1,943,444


For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of September 30, 2018 and December 31, 2017, excluding PCI loans (in thousands):
 
Residential
 
Consumer
September 30, 2018
 
 
 
Performing
$
2,013,528

 
$
430,754

Non-performing
6,390

 
2,529

 
$
2,019,918

 
$
433,283

December 31, 2017
 
 
 
Performing
$
1,744,400

 
$
280,439

Non-performing
4,190

 
1,929

 
$
1,748,590

 
$
282,368


The Company classifies certain loans as troubled debt restructurings when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term, the capitalization of past due amounts and/or the restructuring of scheduled principal payments. One-to-four family and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered troubled debt restructurings. For these loans, the Bank retains its security interest in the real estate collateral. Included in the non-accrual loan total at September 30, 2018, and December 31, 2017, were $3.6 million and $8.8 million, respectively, of troubled debt restructurings. At September 30, 2018 and December 31, 2017, the Company had no specific reserves allocated to loans that are classified as troubled debt restructurings. Non-accrual loans which become troubled debt restructurings are generally returned to accrual status after six months of performance. In addition to the troubled debt restructurings included in non-accrual loans, the Company also has loans classified as accruing troubled debt restructurings at September 30, 2018, and December 31, 2017, which totaled $24.2 million and $33.3 million, respectively. Troubled debt restructurings are considered in the allowance for loan losses similar to other impaired loans.
 
The following table presents information about troubled debt restructurings which occurred during the three and nine months ended September 30, 2018 and 2017, and troubled debt restructurings modified within the previous year and which defaulted during the three and nine months ended September 30, 2018 and 2017 (dollars in thousands):
 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three months ended September 30, 2018
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Commercial real estate – owner occupied
1

 
49

 
50

Commercial real estate – investor
1

 
171

 
210

 
Number of Loans
  
Recorded Investment
Troubled Debt Restructurings
 
 
 
Which Subsequently Defaulted:


 


Commercial real estate – investor
1

 
$
2,820

Consumer
1

 
30

 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Nine months ended September 30, 2018
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Commercial and industrial
2

 
$
496

 
$
502

Commercial real estate – owner occupied
1

 
49

 
50

Commercial real estate – investor
3

 
1,395

 
1,435

Residential real estate
2

 
257

 
270

 
Number of Loans
  
Recorded Investment
Troubled Debt Restructurings
 
 
 
Which Subsequently Defaulted:


 


Commercial real estate – investor
1

 
$
2,820

Consumer
1

 
30


 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three Months Ended September 30, 2017
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Commercial real estate - owner occupied
1

 
$
700

 
$
700

Commercial real estate – investor
1

 
700

 
700

Residential real estate
2

 
328

 
357

 
Number of Loans
  
Recorded Investment
Troubled Debt Restructurings
 
  
 
Which Subsequently Defaulted:
None

  
None

 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Nine months ended September 30, 2017
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Commercial and industrial
1

 
$
665

 
$
665

Commercial real estate - owner occupied
4

 
3,309

 
3,309

Commercial real estate – investor
4

 
6,362

 
6,484

Residential real estate
6

 
1,354

 
1,356

 
Number of Loans
  
Recorded Investment
Troubled Debt Restructurings
 
  
 
Which Subsequently Defaulted:
None

  
None


As part of the Sun acquisition, PCI loans were acquired at a discount primarily due to deteriorated credit quality. PCI loans are accounted for at fair value, based upon the present value of expected future cash flows, with no related allowance for loan losses.
 The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected and the estimated fair value of the PCI loans acquired from Sun at January 31, 2018 (in thousands):
 
Sun
January 31, 2018
Contractually required principal and interest
$
22,556

Contractual cash flows not expected to be collected (non-accretable discount)
(6,115
)
Expected cash flows to be collected at acquisition
16,441

Interest component of expected cash flows (accretable yield)
(3,535
)
Fair value of acquired loans
$
12,906

The following table summarizes the changes in accretable yield for PCI loans during the three and nine months ended September 30, 2018 and 2017 (in thousands):
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
Beginning balance
$
2,300

 
$
161

 
$
1,465

 
$
749

Acquisition
—

 
2,646

 
—

 
—

Accretion
(368
)
 
(1,459
)
 
(328
)
 
(642
)
Reclassification from non-accretable difference
470

 
1,054

 
13

 
1,043

Ending balance
$
2,402

 
$
2,402

 
$
1,150

 
$
1,150