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Loans Receivable, Net
 12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Loans Receivable, Net
Loans Receivable, Net
A summary of loans receivable at December 31, 2018 and 2017 are as follows (in thousands):
 
 
December 31,
 
 
2018
 
2017
Commercial:
 
 
 
 
Commercial and industrial
 
$
304,994

 
$
187,645

Commercial real estate - owner occupied
 
740,375

 
569,497

Commercial real estate - investor
 
2,015,210

 
1,186,302

Total commercial
 
3,060,579

 
1,943,444

Consumer:
 
 
 
 
Residential mortgage
 
2,044,286

 
1,748,590

Home equity loans and lines
 
353,386

 
281,143

Other consumer
 
121,561

 
1,225

Total consumer
 
2,519,233

 
2,030,958

 
 
5,579,812

 
3,974,402

Purchased credit impaired loans
 
8,901

 
1,712

Total loans
 
5,588,713

 
3,976,114

Deferred origination costs, net
 
7,086

 
5,380

Allowance for loan losses
 
(16,577
)
 
(15,721
)
Loans receivable, net
 
$
5,579,222

 
$
3,965,773


The Bank’s eligible mortgage loans are pledged to secure FHLB advances. At December 31, 2018 the Bank pledged $2.918 billion of eligible mortgage loans to secure FHLB advances.
An analysis of the allowance for loan losses for the years ended December 31, 2018, 2017 and 2016 is as follows (in thousands):
 
 
At or For the Year Ended December 31,
 
 
2018
 
2017
 
2016
Balance at beginning of year
 
$
15,721

 
$
15,183

 
$
16,722

Provision charged to operations
 
3,490

 
4,445

 
2,623

Charge-offs
 
(3,841
)
 
(5,384
)
 
(4,490
)
Recoveries
 
1,207

 
1,477

 
328

Balance at end of year
 
$
16,577

 
$
15,721

 
$
15,183


The following table presents an analysis of the allowance for loan losses for the years ended December 31, 2018 and 2017, the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2018 and 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 year ended December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of year
 
$
1,801

 
$
3,175

 
$
7,952

 
$
1,804

 
$
614

 
$
375

 
$
15,721

Provision (benefit) charged to operations
 
(66
)
 
(783
)
 
2,550

 
1,056

 
86

 
647

 
3,490

Charge-offs
 
(230
)
 
(314
)
 
(1,939
)
 
(1,021
)
 
(337
)
 
—

 
(3,841
)
Recoveries
 
104

 
199

 
207

 
574

 
123

 
—

 
1,207

Balance at end of year
 
$
1,609

 
$
2,277

 
$
8,770

 
$
2,413

 
$
486

 
$
1,022

 
$
16,577

For the year ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of year
 
$
2,037

 
$
2,999

 
$
6,361

 
$
2,245

 
$
1,110

 
$
431

 
$
15,183

Provision (benefit) charged to operations
 
(379
)
 
203

 
2,444

 
2,742

 
(509
)
 
(56
)
 
4,445

Charge-offs
 
(380
)
 
(150
)
 
(899
)
 
(3,820
)
 
(135
)
 
—

 
(5,384
)
Recoveries
 
523

 
123

 
46

 
637

 
148

 
—

 
1,477

Balance at end of year
 
$
1,801

 
$
3,175

 
$
7,952

 
$
1,804

 
$
614

 
$
375

 
$
15,721

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

Collectively evaluated for impairment
 
1,609

 
2,277

 
8,770

 
2,413

 
486

 
1,022

 
16,577

Total ending allowance balance
 
$
1,609

 
$
2,277

 
$
8,770

 
$
2,413

 
$
486

 
$
1,022

 
$
16,577

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
 
$
1,626

 
$
5,395

 
$
9,738

 
$
10,064

 
$
2,974

 
$
—

 
$
29,797

Loans collectively evaluated for impairment
 
303,368

 
734,980

 
2,005,472

 
2,034,222

 
471,973

 
—

 
5,550,015

Total ending loan balance
 
$
304,994

 
$
740,375

 
$
2,015,210

 
$
2,044,286

 
$
474,947

 
$
—

 
$
5,579,812

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 December 31, 2018 and 2017 is as follows, excluding PCI loans (in thousands):
 
 
December 31,
 
 
2018
 
2017
Impaired loans with no allocated allowance for loan losses
 
$
29,797

 
$
46,988

Impaired loans with allocated allowance for loan losses
 
—

 
—

 
 
$
29,797

 
$
46,988

Amount of the allowance for loan losses allocated
 
$
—

 
$
—


The Company defines an impaired loan as a 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 December 31, 2018, the impaired loan portfolio totaled $29.8 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 years ended December 31, 2018, 2017 and 2016 was $38.1 million, $39.8 million, and $38.4 million, respectively. If interest income on non-accrual loans and impaired loans had been current in accordance with their original terms, approximately $419,000, $639,000, and $391,000 of interest income for the years ended December 31, 2018, 2017 and 2016, respectively, would have been recorded.
At December 31, 2018, impaired loans include troubled debt restructured loans of $26.5 million, of which $22.9 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 include troubled debt restructured 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 December 31, 2018 and 2017 and for the years ended December 31, 2018 and 2017 is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance for
Loan Losses
Allocated
At December 31, 2018
 
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
1,750

 
$
1,626

 
$
—

Commercial real estate – owner occupied
 
5,413

 
5,395

 
—

Commercial real estate – investor
 
12,633

 
9,738

 
—

Residential real estate
 
10,441

 
10,064

 
—

Consumer
 
3,301

 
2,974

 
—

 
 
$
33,538

 
$
29,797

 
$
—

With an allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
 
—

 
—

 
—

Commercial real estate – investor
 
—

 
—

 
—

Residential real estate
 
—

 
—

 
—

Consumer
 
—

 
—

 
—

 
 
$
—

 
$
—

 
$
—

At 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
 
—

 
—

 
—

 
 
$
—

 
$
—

 
$
—

(continued)
 
 
For the Year Ended December 31,
 
 
2018
 
2017
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
1,075

 
$
107

 
$
643

 
$
60

Commercial real estate – owner occupied
 
8,264

 
297

 
11,890

 
797

Commercial real estate – investor
 
13,934

 
382

 
8,825

 
768

Residential real estate
 
10,787

 
475

 
10,928

 
481

Consumer
 
2,764

 
155

 
2,388

 
144

 
 
$
36,824

 
$
1,416

 
$
34,674

 
$
2,250

With an allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
589

 
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
 
—

 
—

 
—

 
—

Commercial real estate – investor
 
670

 
—

 
3,386

 
81

Residential real estate
 
—

 
—

 
1,585

 
62

Consumer
 
—

 
—

 
119

 
6

 
 
$
1,259

 
$
—

 
$
5,090

 
$
149

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of December 31, 2018 and 2017, excluding PCI loans (in thousands):
 
 
December 31,
 
 
2018
 
2017
Commercial and industrial
 
$
1,587

 
$
503

Commercial real estate – owner occupied
 
501

 
5,962

Commercial real estate – investor
 
5,024

 
8,281

Residential real estate
 
7,389

 
4,190

Consumer
 
2,914

 
1,929

 
 
$
17,415

 
$
20,865


At December 31, 2018, there were no commitments to lend additional funds to borrowers whose loans are in non-accrual status.
The following table presents the aging of the recorded investment in past due loans as of December 31, 2018 and 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
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
—

 
$
—

 
$
—

 
$
—

 
$
304,994

 
$
304,994

Commercial real estate – owner occupied
 
5,104

 
236

 
197

 
5,537

 
734,838

 
740,375

Commercial real estate – investor
 
3,979

 
2,503

 
2,461

 
8,943

 
2,006,267

 
2,015,210

Residential real estate
 
10,199

 
4,979

 
4,451

 
19,629

 
2,024,657

 
2,044,286

Consumer
 
2,200

 
955

 
2,464

 
5,619

 
469,328

 
474,947

 
 
$
21,482

 
$
8,673

 
$
9,573

 
$
39,728

 
$
5,540,084

 
$
5,579,812

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


At December 31, 2018, 2017 and 2016, loans in the amount of $17.4 million, $20.9 million, and $13.6 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. There were no loans that were ninety days or greater past due and still accruing interest. Non-accrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.
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 December 31, 2018 and 2017, and based on the most recent analysis performed, the risk category of loans by loan portfolio segment is as follows, excluding PCI loans (in thousands):
 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2018
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
291,265

 
$
2,777

 
$
10,952

 
$
—

 
$
304,994

Commercial real estate – owner occupied
 
706,825

 
3,000

 
30,550

 
—

 
740,375

Commercial real estate – investor
 
1,966,495

 
23,727

 
24,988

 
—

 
2,015,210

 
 
$
2,964,585

 
$
29,504

 
$
66,490

 
$
—

 
$
3,060,579

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 December 31, 2018 and 2017, excluding PCI loans (in thousands): 
 
 
Residential Real Estate
 
 
Residential
 
Consumer
December 31, 2018
 
 
 
 
Performing
 
$
2,036,897

 
$
472,033

Non-performing
 
7,389

 
2,914

 
 
$
2,044,286

 
$
474,947

December 31, 2017
 
 
 
 
Performing
 
$
1,744,400

 
$
280,439

Non-performing
 
4,190

 
1,929

 
 
$
1,748,590

 
$
282,368


The recorded investment in mortgage and consumer loans collateralized by residential real estate, which are in the process of foreclosure, amounted to $2.2 million at December 31, 2018. The amount of foreclosed residential real estate property held by the Company was $705,000 at December 31, 2018.
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 December 31, 2018, 2017 and 2016 were $3.6 million, $8.8 million, and $3.5 million, respectively, of troubled debt restructurings. At December 31, 2018 and 2017, there were no specific reserves allocated to loans which were classified as troubled debt restructurings. At December 31, 2016 the Company had allocated $510,000 of specific reserves to loans which 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 troubled debt restructuring which are accruing at December 31, 2018, 2017 and 2016 which totaled $22.9 million, $33.3 million, and $27.0 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 years ended December 31, 2018 and 2017, and troubled debt restructurings modified within the previous year and which defaulted during the years ended December 31, 2018 and 2017 (dollars in thousands):
 
 
Number
of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
For the year ended December 31, 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
 
5
 
558

 
598

 
 
 
 
Number of Loans
 
Recorded Investment
Troubled Debt Restructurings
 
 
 
 
 
 
Which Subsequently Defaulted:
 
 
 
 
 
 
Consumer
 
 
 
1
 
$
29

 
 
 
 
 
 
 
 
 
Number
of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
For the year ended December 31, 2017
 
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
 
Commercial and industrial
 
1
 
$
665

 
$
665

Commercial real estate – owner occupied
 
7
 
6,977

 
6,977

Commercial real estate – investor
 
7
 
10,904

 
11,026

Residential real estate
 
8
 
1,637

 
1,600

 
 
 
 
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 years ended December 31, 2018 and 2017 (in thousands):
 
 
For the Year Ended December 31,
 
 
2018
 
2017
Beginning balance
 
$
161

 
$
749

Acquisition
 
2,646

 
—

Accretion
 
(2,257
)
 
(921
)
Reclassification from non-accretable difference
 
3,080

 
333

Ending balance
 
$
3,630

 
$
161