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Loans Receivable, Net
 12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Loans Receivable, Net Loans Receivable, Net
Loans receivable, net, at December 31, 2019 and 2018 consisted of the following (in thousands):
 
 
December 31,
 
 
2019
 
2018
Commercial:
 
 
 
 
Commercial and industrial
 
$
396,091

 
$
304,994

Commercial real estate - owner occupied
 
791,941

 
740,375

Commercial real estate - investor
 
2,284,698

 
2,015,210

Total commercial
 
3,472,730

 
3,060,579

Consumer:
 
 
 
 
Residential real estate
 
2,320,821

 
2,044,286

Home equity loans and lines
 
318,414

 
353,386

Other consumer
 
89,422

 
121,561

Total consumer
 
2,728,657

 
2,519,233

 
 
6,201,387

 
5,579,812

Purchased credit impaired (“PCI”) loans
 
13,265

 
8,901

Total loans
 
6,214,652

 
5,588,713

Deferred origination costs, net
 
9,880

 
7,086

Allowance for loan losses
 
(16,852
)
 
(16,577
)
Loans receivable, net
 
$
6,207,680

 
$
5,579,222


The Bank’s eligible mortgage loans are pledged to secure FHLB advances. At December 31, 2019 the Bank pledged $3.851 billion of eligible mortgage loans to secure FHLB advances.
An analysis of the allowance for loan losses for the years ended December 31, 2019, 2018 and 2017 is as follows (in thousands):
 
 
At or For the Year Ended December 31,
 
 
2019
 
2018
 
2017
Balance at beginning of year
 
$
16,577

 
$
15,721

 
$
15,183

Provision charged to operations
 
1,636

 
3,490

 
4,445

Charge-offs
 
(2,804
)
 
(3,841
)
 
(5,384
)
Recoveries
 
1,443

 
1,207

 
1,477

Balance at end of year
 
$
16,852

 
$
16,577

 
$
15,721


The following table presents an analysis of the allowance for loan losses for the years ended December 31, 2019 and 2018, 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, 2019 and 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 year ended December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of year
 
$
1,609

 
$
2,277

 
$
8,770

 
$
2,413

 
$
486

 
$
1,022

 
$
16,577

Provision (benefit) charged to operations
 
(311
)
 
947

 
638

 
792

 
567

 
(997
)
 
1,636

Charge-offs
 
—

 
(663
)
 
(236
)
 
(1,299
)
 
(606
)
 
—

 
(2,804
)
Recoveries
 
160

 
332

 
711

 
96

 
144

 
—

 
1,443

Balance at end of year
 
$
1,458

 
$
2,893

 
$
9,883

 
$
2,002

 
$
591

 
$
25

 
$
16,852

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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
 
$
—

 
$
474

 
$
—

 
$
—

 
$
2

 
$
—

 
$
476

Collectively evaluated for impairment
 
1,458

 
2,419

 
9,883

 
2,002

 
589

 
25

 
16,376

Total ending allowance balance
 
$
1,458

 
$
2,893

 
$
9,883

 
$
2,002

 
$
591

 
$
25

 
$
16,852

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
 
$
243

 
$
6,163

 
$
5,584

 
$
11,009

 
$
3,511

 
$
—

 
$
26,510

Loans collectively evaluated for impairment
 
395,848

 
785,778

 
2,279,114

 
2,309,812

 
404,325

 
—

 
6,174,877

Total ending loan balance
 
$
396,091

 
$
791,941

 
$
2,284,698

 
$
2,320,821

 
$
407,836

 
$
—

 
$
6,201,387

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 December 31, 2019 and 2018 is as follows, excluding PCI loans (in thousands):
 
 
December 31,
 
 
2019
 
2018
Impaired loans with no allocated allowance for loan losses
 
$
24,313

 
$
29,797

Impaired loans with allocated allowance for loan losses
 
2,197

 
—

 
 
$
26,510

 
$
29,797

Amount of the allowance for loan losses allocated
 
$
476

 
$
—


The Company defines an impaired loan as a non-accrual commercial real estate, multi-family, land, construction and commercial loan in excess of $250,000 for which it is probable, based on current information, that the Company will not collect all amounts due under the contractual terms of the loan agreement. Impaired loans also include all loans modified as troubled debt restructurings. At December 31, 2019, the impaired loan portfolio totaled $26.5 million, for which there was $476,000 specific allocation in the allowance for loan losses. 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 years ended December 31, 2019, 2018 and 2017 was $29.4 million, $38.1 million, and $39.8 million, respectively. If interest income on non-accrual loans and impaired loans had been current in accordance with their original terms, approximately $372,000, $419,000, and $639,000 of interest income for the years ended December 31, 2019, 2018 and 2017, respectively, would have been recorded.
At December 31, 2019, impaired loans include troubled debt restructured (“TDR”) loans of $24.6 million, of which $18.0 million were performing in accordance with their restructured terms for a minimum of six months and were accruing interest. 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.
The summary of loans individually evaluated for impairment by loan portfolio segment as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018 is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance for
Loan Losses
Allocated
At December 31, 2019
 
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
265

 
$
243

 
$
—

Commercial real estate – owner occupied
 
4,062

 
3,968

 
—

Commercial real estate – investor
 
6,665

 
5,584

 
—

Residential real estate
 
11,009

 
11,009

 
—

Consumer
 
3,734

 
3,509

 
—

 
 
$
25,735

 
$
24,313

 
$
—

With an allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
 
2,376

 
2,195

 
474

Commercial real estate – investor
 
—

 
—

 
—

Residential real estate
 
—

 
—

 
—

Consumer
 
2

 
2

 
2

 
 
$
2,378

 
$
2,197

 
$
476

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
 
—

 
—

 
—

 
 
$
—

 
$
—

 
$
—

(continued)
 
 
For the Year Ended December 31,
 
 
2019
 
2018
 
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
523

 
$
5

 
$
1,075

 
$
107

Commercial real estate – owner occupied
 
4,171

 
179

 
8,264

 
297

Commercial real estate – investor
 
9,012

 
222

 
13,934

 
382

Residential real estate
 
10,275

 
548

 
10,787

 
475

Consumer
 
3,275

 
178

 
2,764

 
155

 
 
$
27,256

 
$
1,132

 
$
36,824

 
$
1,416

With an allowance recorded:
 
 
 
 
 
 
Commercial and industrial
 
$
—

 
$
—

 
$
589

 
$
—

Commercial real estate – owner occupied
 
2,173

 
138

 
—

 
—

Commercial real estate – investor
 
—

 
—

 
670

 
—

Residential real estate
 
—

 
—

 
—

 
—

Consumer
 
—

 
—

 
—

 
—

 
 
$
2,173

 
$
138

 
$
1,259

 
$
—


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

 
$
1,587

Commercial real estate – owner occupied
 
4,811

 
501

Commercial real estate – investor
 
2,917

 
5,024

Residential real estate
 
7,181

 
7,389

Consumer
 
2,733

 
2,914

 
 
$
17,849

 
$
17,415


At December 31, 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 December 31, 2019 and 2018 by loan portfolio segment, excluding PCI loans (in thousands):
 
 
30-59
Days
Past Due
 
60-89
Days
Past Due
 
90 Days or Greater
Past Due
 
Total
Past Due
 
Loans Not
Past Due
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
100

 
$
—

 
$
207

 
$
307

 
$
395,784

 
$
396,091

Commercial real estate – owner occupied
 
1,541

 
1,203

 
1,040

 
3,784

 
788,157

 
791,941

Commercial real estate – investor
 
381

 
938

 
2,792

 
4,111

 
2,280,587

 
2,284,698

Residential real estate
 
8,161

 
3,487

 
2,859

 
14,507

 
2,306,314

 
2,320,821

Consumer
 
1,048

 
491

 
2,388

 
3,927

 
403,909

 
407,836

 
 
$
11,231

 
$
6,119

 
$
9,286

 
$
26,636

 
$
6,174,751

 
$
6,201,387

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 December 31, 2019, 2018 and 2017, loans in the amount of $17.8 million, $17.4 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 December 31, 2019, 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, 2019 and 2018, and based on the most recent analysis performed, the risk category of loans by loan portfolio segment, excluding PCI loans, is as follows (in thousands):
 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
December 31, 2019
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
 
$
378,154

 
$
2,657

 
$
15,280

 
$
—

 
$
396,091

Commercial real estate – owner occupied
 
756,592

 
3,985

 
31,364

 
—

 
791,941

Commercial real estate – investor
 
2,240,104

 
23,559

 
21,035

 
—

 
2,284,698

 
 
$
3,374,850

 
$
30,201

 
$
67,679

 
$
—

 
$
3,472,730

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 December 31, 2019 and 2018, excluding PCI loans (in thousands): 
 
 
Residential
 
Consumer
December 31, 2019
 
 
 
 
Performing
 
$
2,313,640

 
$
405,103

Non-performing
 
7,181

 
2,733

 
 
$
2,320,821

 
$
407,836

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 December 31, 2019. The amount of foreclosed residential real estate property held by the Company was $51,000 at December 31, 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 December 31, 2019, 2018 and 2017 were $6.6 million, $3.6 million, and $8.8 million, respectively, of troubled debt restructurings. At December 31, 2019, there were $476,000 specific reserves allocated to loans which were classified as troubled debt restructurings. At December 31, 2018 and 2017, there were no specific reserves allocated to loans which were 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 restructuring at December 31, 2019, 2018 and 2017, which totaled $18.0 million, $22.9 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 years ended December 31, 2019 and 2018, and troubled debt restructurings modified within the previous year and which defaulted during the years ended December 31, 2019 and 2018 (dollars in thousands):
 
 
Number
of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
For the year ended December 31, 2019
 
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
 
Commercial real estate – owner occupied
 
1
 
$
154

 
$
198

Commercial real estate – investor
 
1
 
272

 
393

Residential real estate
 
6
 
1,036

 
1,091

Consumer
 
7
 
663

 
683

 
 
 
 
Number of Loans
 
Recorded Investment
Troubled Debt Restructurings
 
 
 
 
 
 
Which Subsequently Defaulted:
 
 
 
 
 
 
Consumer
 
 
 
1
 
$
115

 
 
 
 
 
 
 
 
 
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


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 Bank
 
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 years ended December 31, 2019 and 2018 (in thousands):
 
 
For the Year Ended December 31,
 
 
2019
 
2018
Beginning balance
 
$
3,630

 
$
161

Acquisition
 
691

 
2,646

Accretion
 
(2,613
)
 
(2,257
)
Reclassification from non-accretable difference
 
1,317

 
3,080

Ending balance
 
$
3,025

 
$
3,630