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 present s 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 Commercial Real Estate - Owner Occupied Commercial Real Estate - Investor Residential 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, ap proximately $372,000 , $419,000 , and $639,000 of interest income for the years ended December 31, 2019 , 2018 and 2017 , respec tively, 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 Recorded Allowance for 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 Interest Average Interest 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 60-89 90 Days or Greater Total Loans Not 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 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 Pre-modification Post-modification 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 Pre-modification Post-modification 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 |