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Loans Receivable, Net
 6 Months Ended
Jun. 30, 2019
Receivables [Abstract]  
Loans Receivable, Net Loans Receivable, Net
Loans receivable, net at June 30, 2019 and December 31, 2018 consisted of the following (in thousands):
 
June 30, 2019
 
December 31, 2018
Commercial:
 
 
 
Commercial and industrial
$
391,588

 
$
304,994

Commercial real estate – owner occupied
770,730

 
740,375

Commercial real estate – investor
2,131,762

 
2,015,210

Total commercial
3,294,080

 
3,060,579

Consumer:
 
 
 
Residential real estate
2,193,489

 
2,044,286

Home equity loans and lines
341,869

 
353,386

Other consumer
109,015

 
121,561

Total consumer
2,644,373

 
2,519,233

 
5,938,453

 
5,579,812

Purchased credit impaired (“PCI”) loans
13,432

 
8,901

Total Loans
5,951,885

 
5,588,713

Deferred origination costs, net
8,180

 
7,086

Allowance for loan losses
(16,135
)
 
(16,577
)
Total loans, net
$
5,943,930

 
$
5,579,222


An analysis of the allowance for loan losses for the three and six months ended June 30, 2019 and 2018 is as follows (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Balance at beginning of period
$
16,705

 
$
16,817

 
$
16,577

 
$
15,721

Provision charged to operations
356

 
706

 
976

 
2,077

Charge-offs
(1,138
)
 
(1,284
)
 
(2,006
)
 
(1,817
)
Recoveries
212

 
452

 
588

 
710

Balance at end of period
$
16,135

 
$
16,691

 
$
16,135

 
$
16,691



The following table presents an analysis of the allowance for loan losses for the three and six months ended June 30, 2019 and 2018 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 June 30, 2019 and December 31, 2018, 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 June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,647

 
$
3,438

 
$
8,242

 
$
1,965

 
$
367

 
$
1,046

 
$
16,705

Provision (benefit) charged to operations
(34
)
 
(439
)
 
117

 
729

 
285

 
(302
)
 
356

Charge-offs
—

 
(132
)
 
(65
)
 
(768
)
 
(173
)
 
—

 
(1,138
)
Recoveries
26

 
1

 
112

 
40

 
33

 
—

 
212

Balance at end of period
$
1,639

 
$
2,868

 
$
8,406

 
$
1,966

 
$
512

 
$
744

 
$
16,135

For the three months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
2,251

 
$
2,871

 
$
8,838

 
$
2,138

 
$
507

 
$
212

 
$
16,817

Provision (benefit) charged to operations
(186
)
 
(616
)
 
1,166

 
8

 
(15
)
 
349

 
706

Charge-offs
(13
)
 
(90
)
 
(978
)
 
(157
)
 
(46
)
 
—

 
(1,284
)
Recoveries
28

 
175

 
32

 
137

 
80

 
—

 
452

Balance at end of period
$
2,080

 
$
2,340

 
$
9,058

 
$
2,126

 
$
526

 
$
561

 
$
16,691

For the six months ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,609

 
$
2,277

 
$
8,770

 
$
2,413

 
$
486

 
$
1,022

 
$
16,577

Provision (benefit) charged to operations
(53
)
 
1,112

 
(685
)
 
705

 
175

 
(278
)
 
976

Charge-offs
—

 
(522
)
 
(86
)
 
(1,193
)
 
(205
)
 
—

 
(2,006
)
Recoveries
83

 
1

 
407

 
41

 
56

 
—

 
588

Balance at end of period
$
1,639

 
$
2,868

 
$
8,406

 
$
1,966

 
$
512

 
$
744

 
$
16,135

For the six months ended June 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
283

 
(923
)
 
2,045

 
501

 
(15
)
 
186

 
2,077

Charge-offs
(56
)
 
(90
)
 
(1,101
)
 
(401
)
 
(169
)
 
—

 
(1,817
)
Recoveries
52

 
178

 
162

 
222

 
96

 
—

 
710

Balance at end of period
$
2,080

 
$
2,340

 
$
9,058

 
$
2,126

 
$
526

 
$
561

 
$
16,691

June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
565

 
$
—

 
$
—

 
$
—

 
$
—

 
$
565

Collectively evaluated for impairment
1,639

 
2,303

 
8,406

 
1,966

 
512

 
744

 
15,570

Total ending allowance balance
$
1,639

 
$
2,868

 
$
8,406

 
$
1,966

 
$
512

 
$
744

 
$
16,135

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
248

 
$
6,598

 
$
8,169

 
$
10,179

 
$
3,373

 
$
—

 
$
28,567

Loans collectively evaluated for impairment
391,340

 
764,132

 
2,123,593

 
2,183,310

 
447,511

 
—

 
5,909,886

Total ending loan balance
$
391,588

 
$
770,730

 
$
2,131,762

 
$
2,193,489

 
$
450,884

 
$
—

 
$
5,938,453


 
Commercial
and 
Industrial
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 
Residential
Real Estate
 
Consumer
 
Unallocated
 
Total
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



A summary of impaired loans at June 30, 2019, and December 31, 2018, is as follows, excluding PCI loans (in thousands):
 
 
June 30, 2019
 
December 31, 2018
Impaired loans with no allocated allowance for loan losses
$
26,674

 
$
29,797

Impaired loans with allocated allowance for loan losses
1,893

 
—

 
$
28,567

 
$
29,797

Amount of the allowance for loan losses allocated
$
565

 
$
—


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 June 30, 2019, the impaired loan portfolio totaled $28.6 million for which there was a specific allocation in the allowance for loan losses of $565,000. 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. The average balance of impaired loans for the three and six months ended June 30, 2019 were $31.5 million and $30.9 million, respectively, and for the three and six months ended June 30, 2018 were $38.4 million and $41.3 million, respectively.
At June 30, 2019 and December 31, 2018, impaired loans included troubled debt restructured (“TDR”) loans of $26.1 million and$26.5 million, respectively.
The summary of loans individually evaluated for impairment by loan portfolio segment as of June 30, 2019, and December 31, 2018 and for the three and six months ended June 30, 2019 and 2018, is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
As of June 30, 2019
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Commercial and industrial
$
270

 
$
248

 
$
—

Commercial real estate – owner occupied
4,781

 
4,705

 
—

Commercial real estate – investor
9,848

 
8,169

 
—

Residential real estate
10,551

 
10,179

 
—

Consumer
3,711

 
3,373

 
—

 
$
29,161

 
$
26,674

 
$
—

With an allowance recorded:
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
1,918

 
1,893

 
565

Commercial real estate – investor
—

 
—

 
—

Residential real estate
—

 
—

 
—

Consumer
—

 
—

 
—

 
$
1,918

 
$
1,893

 
$
565

As of 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
—

 
—

 
—

 
$
—

 
$
—

 
$
—

 
Three Months Ended June 30,
 
2019
 
2018
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
249

 
$
1

 
$
512

 
$
—

Commercial real estate – owner occupied
3,808

 
80

 
7,666

 
36

Commercial real estate – investor
10,882

 
22

 
13,177

 
48

Residential real estate
10,104

 
140

 
11,217

 
112

Consumer
3,270

 
48

 
2,682

 
46

 
$
28,313

 
$
291

 
$
35,254

 
$
242

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
1,472

 
$
—

Commercial real estate – owner occupied
3,197

 
—

 
—

 
—

Commercial real estate – investor
—

 
—

 
1,677

 
—

Residential real estate
—

 
—

 
—

 
—

Consumer
—

 
—

 
—

 
—

 
$
3,197

 
$
—

 
$
3,149

 
$
—

 
Six Months Ended June 30,
 
2019
 
2018
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
708

 
$
4

 
$
629

 
$
16

Commercial real estate – owner occupied
4,337

 
122

 
10,155

 
151

Commercial real estate – investor
10,501

 
158

 
14,759

 
202

Residential real estate
10,090

 
271

 
11,013

 
237

Consumer
3,171

 
94

 
2,609

 
83

 
$
28,807

 
$
649

 
$
39,165

 
$
689

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
981

 
$
—

Commercial real estate – owner occupied
—

 
—

 
—

 
—

Commercial real estate – investor
2,131

 
36

 
1,118

 
—

Residential real estate
—

 
—

 
—

 
—

Consumer
—

 
—

 
—

 
—

 
$
2,131

 
$
36

 
$
2,099

 
$
—

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of June 30, 2019 and December 31, 2018, excluding PCI loans (in thousands):
 
June 30, 2019
 
December 31, 2018
Commercial and industrial
$
207

 
$
1,587

Commercial real estate – owner occupied
4,818

 
501

Commercial real estate – investor
4,050

 
5,024

Residential real estate
5,747

 
7,389

Consumer
2,974

 
2,914

 
$
17,796

 
$
17,415


 
At June 30, 2019, 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 June 30, 2019 and December 31, 2018 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
June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,000

 
$
—

 
$
207

 
$
1,207

 
$
390,381

 
$
391,588

Commercial real estate – owner occupied
2,686

 
1,978

 
1,577

 
6,241

 
764,489

 
770,730

Commercial real estate – investor
4,579

 
530

 
4,024

 
9,133

 
2,122,629

 
2,131,762

Residential real estate
6,919

 
2,549

 
2,367

 
11,835

 
2,181,654

 
2,193,489

Consumer
841

 
301

 
2,583

 
3,725

 
447,159

 
450,884

 
$
16,025

 
$
5,358

 
$
10,758

 
$
32,141

 
$
5,906,312

 
$
5,938,453

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


At June 30, 2019 and December 31, 2018, loans in the amount of $17.8 million and $17.4 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 June 30, 2019, 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 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 June 30, 2019 and December 31, 2018, 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
June 30, 2019
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
372,954

 
$
4,553

 
$
14,081

 
$
—

 
$
391,588

Commercial real estate – owner occupied
740,212

 
7,171

 
23,347

 
—

 
770,730

Commercial real estate – investor
2,083,762

 
31,588

 
16,412

 
—

 
2,131,762

 
$
3,196,928

 
$
43,312

 
$
53,840

 
$
—

 
$
3,294,080

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


For residential and consumer loans, 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 June 30, 2019 and December 31, 2018, excluding PCI loans (in thousands):
 
Residential
 
Consumer
June 30, 2019
 
 
 
Performing
$
2,187,742

 
$
447,910

Non-performing
5,747

 
2,974

 
$
2,193,489

 
$
450,884

December 31, 2018
 
 
 
Performing
$
2,036,897

 
$
472,033

Non-performing
7,389

 
2,914

 
$
2,044,286

 
$
474,947


The recorded investment in residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, amounted to $1.8 million at June 30, 2019. The amount of foreclosed residential real estate property held by the Company was $112,000 at June 30, 2019.
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 June 30, 2019, and December 31, 2018, were $6.8 million and $3.6 million, respectively, of troubled debt restructurings. At June 30, 2019, and December 31, 2018, the Company had $464,000 and $0, respectively, of 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 June 30, 2019 and December 31, 2018, which totaled $19.3 million and $22.9 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 six months ended June 30, 2019 and 2018, and troubled debt restructurings modified within the previous year and which defaulted during the three and six months ended June 30, 2019 and 2018 (dollars in thousands):
 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three months ended June 30, 2019
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Consumer
4

 
$
442

 
$
462

Residential real estate
2

 
332

 
351

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

 
None

 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Six months ended June 30, 2019
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Consumer
4

 
$
442

 
$
462

Residential real estate
5

 
921

 
972

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

 
None


 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three Months Ended June 30, 2018
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Commercial and industrial
1

 
$
259

 
$
259

Commercial real estate – investor
1

 
1,045

 
1,045

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

  
None

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

 
$
496

 
$
502

Commercial real estate – investor
2

 
1,224

 
1,225

Residential real estate
2

 
257

 
270

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

 
None


As part of the Capital Bank 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 Capital Bank at January 31, 2019 (in thousands):
 
Capital
January 31, 2019
Contractually required principal and interest
$
6,877

Contractual cash flows not expected to be collected (non-accretable discount)
(769
)
Expected cash flows to be collected at acquisition
6,108

Interest component of expected cash flows (accretable yield)
(691
)
Fair value of acquired loans
$
5,417

The following table summarizes the changes in accretable yield for PCI loans during the three and six months ended June 30, 2019 and 2018 (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Beginning balance
$
4,193

 
$
3,492

 
$
3,630

 
$
161

Acquisition
—

 
—

 
691

 
3,535

Accretion
(531
)
 
(869
)
 
(1,184
)
 
(1,091
)
Reclassification from non-accretable difference
(479
)
 
566

 
46

 
584

Ending balance
$
3,183

 
$
3,189

 
$
3,183

 
$
3,189