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Loans Receivable, Net
 9 Months Ended
Sep. 30, 2019
Receivables [Abstract]  
Loans Receivable, Net Loans Receivable, Net
Loans receivable, net at September 30, 2019 and December 31, 2018 consisted of the following (in thousands):
 
September 30, 2019
 
December 31, 2018
Commercial:
 
 
 
Commercial and industrial
$
405,970

 
$
304,994

Commercial real estate – owner occupied
786,852

 
740,375

Commercial real estate – investor
2,220,799

 
2,015,210

Total commercial
3,413,621

 
3,060,579

Consumer:
 
 
 
Residential real estate
2,234,026

 
2,044,286

Home equity loans and lines
330,370

 
353,386

Other consumer
98,835

 
121,561

Total consumer
2,663,231

 
2,519,233

 
6,076,852

 
5,579,812

Purchased credit impaired (“PCI”) loans
13,281

 
8,901

Total Loans
6,090,133

 
5,588,713

Deferred origination costs, net
8,441

 
7,086

Allowance for loan losses
(16,636
)
 
(16,577
)
Total loans, net
$
6,081,938

 
$
5,579,222


An analysis of the allowance for loan losses for the three and nine months ended September 30, 2019 and 2018 is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Balance at beginning of period
$
16,135

 
$
16,691

 
$
16,577

 
$
15,721

Provision charged to operations
305

 
907

 
1,281

 
2,984

Charge-offs
(353
)
 
(891
)
 
(2,359
)
 
(2,708
)
Recoveries
549

 
114

 
1,137

 
824

Balance at end of period
$
16,636

 
$
16,821

 
$
16,636

 
$
16,821



The following table presents an analysis of the allowance for loan losses for the three and nine months ended September 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 September 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
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,639

 
$
2,868

 
$
8,406

 
$
1,966

 
$
512

 
$
744

 
$
16,135

Provision (benefit) charged to operations
(352
)
 
80

 
711

 
193

 
10

 
(337
)
 
305

Charge-offs
—

 
(142
)
 
(57
)
 
(27
)
 
(127
)
 
—

 
(353
)
Recoveries
49

 
114

 
292

 
39

 
55

 
—

 
549

Balance at end of period
$
1,336

 
$
2,920

 
$
9,352

 
$
2,171

 
$
450

 
$
407

 
$
16,636

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 nine months ended
September 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
(406
)
 
1,192

 
26

 
899

 
185

 
(615
)
 
1,281

Charge-offs
—

 
(663
)
 
(143
)
 
(1,221
)
 
(332
)
 
—

 
(2,359
)
Recoveries
133

 
114

 
699

 
80

 
111

 
—

 
1,137

Balance at end of period
$
1,336

 
$
2,920

 
$
9,352

 
$
2,171

 
$
450

 
$
407

 
$
16,636

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

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

 
$
547

 
$
—

 
$
—

 
$
—

 
$
—

 
$
547

Collectively evaluated for impairment
1,336

 
2,373

 
9,352

 
2,171

 
450

 
407

 
16,089

Total ending allowance balance
$
1,336

 
$
2,920

 
$
9,352

 
$
2,171

 
$
450

 
$
407

 
$
16,636

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
246

 
$
6,152

 
$
7,975

 
$
10,093

 
$
3,351

 
$
—

 
$
27,817

Loans collectively evaluated for impairment
405,724

 
780,700

 
2,212,824

 
2,223,933

 
425,854

 
—

 
6,049,035

Total ending loan balance
$
405,970

 
$
786,852

 
$
2,220,799

 
$
2,234,026

 
$
429,205

 
$
—

 
$
6,076,852


 
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 September 30, 2019, and December 31, 2018, is as follows, excluding PCI loans (in thousands):
 
 
September 30, 2019
 
December 31, 2018
Impaired loans with no allocated allowance for loan losses
$
25,539

 
$
29,797

Impaired loans with allocated allowance for loan losses
2,278

 
—

 
$
27,817

 
$
29,797

Amount of the allowance for loan losses allocated
$
547

 
$
—


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, 2019, the impaired loan portfolio totaled $27.8 million for which there was a specific allocation in the allowance for loan losses of $547,000. 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 nine months ended September 30, 2019 were $28.2 million and $30.2 million, respectively, and for the three and nine months ended September 30, 2018 were $32.9 million and $39.2 million, respectively.
At September 30, 2019 and December 31, 2018, impaired loans included troubled debt restructured (“TDR”) loans of $25.1 million and $26.5 million, respectively.
The summary of loans individually evaluated for impairment by loan portfolio segment as of September 30, 2019, and December 31, 2018 and for the three and nine months ended September 30, 2019 and 2018, is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
As of September 30, 2019
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Commercial and industrial
$
268

 
$
246

 
$
—

Commercial real estate – owner occupied
3,908

 
3,874

 
—

Commercial real estate – investor
9,152

 
7,975

 
—

Residential real estate
10,459

 
10,093

 
—

Consumer
3,730

 
3,351

 
—

 
$
27,517

 
$
25,539

 
$
—

With an allowance recorded:
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
2,415

 
2,278

 
547

Commercial real estate – investor
—

 
—

 
—

Residential real estate
—

 
—

 
—

Consumer
—

 
—

 
—

 
$
2,415

 
$
2,278

 
$
547

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 September 30,
 
2019
 
2018
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
247

 
$
1

 
$
982

 
$
69

Commercial real estate – owner occupied
4,290

 
6

 
5,484

 
75

Commercial real estate – investor
8,072

 
85

 
12,191

 
102

Residential real estate
10,136

 
128

 
10,741

 
119

Consumer
3,362

 
42

 
2,782

 
33

 
$
26,107

 
$
262

 
$
32,180

 
$
398

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
736

 
$
—

Commercial real estate – owner occupied
2,086

 
70

 
—

 
—

Commercial real estate – investor
—

 
—

 
—

 
—

Residential real estate
—

 
—

 
—

 
—

Consumer
—

 
—

 
—

 
—

 
$
2,086

 
$
70

 
$
736

 
$
—

 
Nine Months Ended September 30,
 
2019
 
2018
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
593

 
$
5

 
$
906

 
$
85

Commercial real estate – owner occupied
4,221

 
128

 
8,978

 
226

Commercial real estate – investor
9,869

 
243

 
14,259

 
304

Residential real estate
10,091

 
399

 
10,873

 
356

Consumer
3,216

 
136

 
2,629

 
116

 
$
27,990

 
$
911

 
$
37,645

 
$
1,087

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
$
—

 
$
736

 
$
—

Commercial real estate – owner occupied
2,168

 
106

 
—

 
—

Commercial real estate – investor
—

 
—

 
838

 
—

Residential real estate
—

 
—

 
—

 
—

Consumer
—

 
—

 
—

 
—

 
$
2,168

 
$
106

 
$
1,574

 
$
—

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

 
$
1,587

Commercial real estate – owner occupied
4,537

 
501

Commercial real estate – investor
4,073

 
5,024

Residential real estate
5,953

 
7,389

Consumer
2,683

 
2,914

 
$
17,453

 
$
17,415


 
At September 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 September 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
September 30, 2019
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
483

 
$
—

 
$
207

 
$
690

 
$
405,280

 
$
405,970

Commercial real estate – owner occupied
2,107

 
2,732

 
984

 
5,823

 
781,029

 
786,852

Commercial real estate – investor
1,489

 
2,005

 
3,939

 
7,433

 
2,213,366

 
2,220,799

Residential real estate
9,619

 
2,775

 
2,409

 
14,803

 
2,219,223

 
2,234,026

Consumer
926

 
429

 
2,297

 
3,652

 
425,553

 
429,205

 
$
14,624

 
$
7,941

 
$
9,836

 
$
32,401

 
$
6,044,451

 
$
6,076,852

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 September 30, 2019 and December 31, 2018, loans in the amount of $17.5 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 September 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 September 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
September 30, 2019
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
391,823

 
$
1,785

 
$
12,362

 
$
—

 
$
405,970

Commercial real estate – owner occupied
759,858

 
3,590

 
23,404

 
—

 
786,852

Commercial real estate – investor
2,152,925

 
52,405

 
15,469

 
—

 
2,220,799

 
$
3,304,606

 
$
57,780

 
$
51,235

 
$
—

 
$
3,413,621

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 September 30, 2019 and December 31, 2018, excluding PCI loans (in thousands):
 
Residential
 
Consumer
September 30, 2019
 
 
 
Performing
$
2,228,073

 
$
426,522

Non-performing
5,953

 
2,683

 
$
2,234,026

 
$
429,205

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 $2.1 million at September 30, 2019. The amount of foreclosed residential real estate property held by the Company was $81,000 at September 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 September 30, 2019, and December 31, 2018, were $6.2 million and $3.6 million, respectively, of troubled debt restructurings. At September 30, 2019, and December 31, 2018, the Company had $547,000 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 nine 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, 2019 and December 31, 2018, which totaled $19.0 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 nine months ended September 30, 2019 and 2018, and troubled debt restructurings modified within the previous year and which defaulted during the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):
 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three months ended September 30, 2019
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Consumer
1

 
$
54

 
$
54

 
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, 2019
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Consumer
5

 
$
496

 
$
516

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 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


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 nine months ended September 30, 2019 and 2018 (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
Beginning balance
$
3,183

 
$
2,300

 
$
3,630

 
$
161

Acquisition
—

 
—

 
691

 
2,646

Accretion
(599
)
 
(368
)
 
(1,783
)
 
(1,459
)
Reclassification from non-accretable difference
69

 
470

 
115

 
1,054

Ending balance
$
2,653

 
$
2,402

 
$
2,653

 
$
2,402