Loans Receivable and Allowance for Loan Losses | 90 days accruing Mortgage loans: Residential $ 5,755 7,330 11,876 24,961 1,231,932 1,256,893 — Commercial 1,853 275 2,736 4,864 1,771,135 1,775,999 — Multi-family 775 — 847 1,622 1,191,582 1,193,204 — Construction — — 2,096 2,096 300,206 302,302 — Total mortgage loans 8,383 7,605 17,555 33,543 4,494,855 4,528,398 — Commercial loans 440 1,010 17,892 19,342 1,304,902 1,324,244 — Consumer loans 2,224 1,080 4,187 7,491 568,223 575,714 — Total gross loans $ 11,047 9,695 39,634 60,376 6,367,980 6,428,356 — December 31, 2014 30-59 Days 60-89 Days Non-accrual Total Past Due and Non-accrual Current Total Loans Receivable Recorded Investment > 90 days accruing Mortgage loans: Residential $ 10,121 4,331 17,222 31,674 1,219,771 1,251,445 — Commercial 146 30 20,026 20,202 1,674,157 1,694,359 — Multi-family — — 321 321 1,041,261 1,041,582 — Construction — — — — 221,102 221,102 — Total mortgage loans 10,267 4,361 37,569 52,197 4,156,291 4,208,488 — Commercial loans 1,000 371 12,342 13,713 1,248,709 1,262,422 — Consumer loans 2,398 2,509 3,944 8,851 602,616 611,467 — Total gross loans $ 13,665 7,241 53,855 74,761 6,007,616 6,082,377 — Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The principal amounts of these non-accrual loans were $39.6 million and $53.9 million at September 30, 2015 and December 31, 2014 , respectively. Included in non-accrual loans were $15.9 million and $8.4 million of loans which were less than 90 days past due at September 30, 2015 and December 31, 2014 , respectively. There were no loans 90 days or greater past due and still accruing interest at September 30, 2015 , or December 31, 2014 . The Company defines an impaired loan as a non-homogeneous loan greater than $1.0 million for which it is probable, based on current information, all amounts due under the contractual terms of the loan agreement will not be collected. Impaired loans also include all loans modified as troubled debt restructurings (“TDRs”). A loan is deemed to be a TDR when a loan modification resulting in a concession is made in an effort to mitigate potential loss arising from a borrower’s financial difficulty. Smaller balance homogeneous loans, including residential mortgages and other consumer loans, are evaluated collectively for impairment and are excluded from the definition of impaired loans, unless modified as TDRs. The Company separately calculates the reserve for loan losses on impaired loans. The Company may recognize impairment of a loan based upon: (1) the present value of expected cash flows discounted at the effective interest rate; (2) if a loan is collateral dependent, the fair value of collateral; or (3) the fair value of the loan. Additionally, if impaired loans have risk characteristics in common, those loans may be aggregated and historical statistics may be used as a means of measuring those impaired loans. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analyses of collateral dependent impaired loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral dependent impaired loan and is updated annually or more frequently, if required. A specific allocation of the allowance for loan losses is established for each collateral dependent impaired loan with a carrying balance greater than the collateral’s fair value, less estimated costs to sell. Charge-offs are generally taken for the amount of the specific allocation when operations associated with the respective property cease and it is determined that collection of amounts due will be derived primarily from the disposition of the collateral. At each quarter end, if a loan is designated as a collateral dependent impaired loan and the third party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value. The Company believes there have been no significant time lapses as a result of this process. At September 30, 2015 , there were 148 impaired loans totaling $67.9 million . Included in this total were 123 TDRs related to 121 borrowers totaling $47.9 million that were performing in accordance with their restructured terms and which continued to accrue interest at September 30, 2015 . At December 31, 2014 , there were 147 impaired loans totaling $85.4 million . Included in this total were 123 TDRs to 120 borrowers totaling $54.8 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2014 . The following table summarizes loans receivable by portfolio segment and impairment method, excluding PCI loans (in thousands): September 30, 2015 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 48,809 16,678 2,402 67,889 Collectively evaluated for impairment 4,479,589 1,307,566 573,312 6,360,467 Total gross loans $ 4,528,398 1,324,244 575,714 6,428,356 December 31, 2014 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 66,548 16,463 2,384 85,395 Collectively evaluated for impairment 4,141,940 1,245,959 609,083 5,996,982 Total gross loans $ 4,208,488 1,262,422 611,467 6,082,377 The allowance for loan losses is summarized by portfolio segment and impairment classification as follows (in thousands): September 30, 2015 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total Individually evaluated for impairment $ 2,184 91 106 2,381 — 2,381 Collectively evaluated for impairment 29,438 24,985 3,633 58,056 27 58,083 Total gross loans $ 31,622 25,076 3,739 60,437 27 60,464 December 31, 2014 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total Individually evaluated for impairment $ 4,696 2,318 113 7,127 — 7,127 Collectively evaluated for impairment 27,281 22,063 4,768 54,112 495 54,607 Total gross loans $ 31,977 24,381 4,881 61,239 495 61,734 Loan modifications to borrowers experiencing financial difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, the Company attempts to obtain additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The following tables present the number of loans modified as TDRs during the three and nine months ended September 30, 2015 and 2014 and their balances immediately prior to the modification date and post-modification as of September 30, 2015 and 2014 : For the three months ended September 30, 2015 September 30, 2014 Troubled Debt Restructuring Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment ($ in thousands) Mortgage loans: Residential 1 $ 258 $ 256 4 $ 742 $ 774 Total mortgage loans 1 258 256 4 742 774 Commercial loans — — — 1 — 367 Consumer loans — — — 2 393 165 Total restructured loans 1 $ 258 $ 256 7 $ 1,135 $ 1,306 For the nine months ended September 30, 2015 September 30, 2014 Troubled Debt Restructuring Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification ($ in thousands) Mortgage loans: Residential 6 $ 2,192 2,184 12 $ 2,705 $ 2,443 Commercial — — — 1 865 866 Construction 1 2,600 2,096 Total mortgage loans 7 4,792 4,280 13 3,570 3,309 Commercial loans 4 6,659 6,903 2 300 665 Consumer loans 2 123 115 2 393 165 Total restructured loans 13 $ 11,574 $ 11,298 17 $ 4,263 $ 4,139 All TDRs are impaired loans, which are individually evaluated for impairment, as previously discussed. Estimated collateral values of collateral dependent impaired loans modified during the three and nine months ended September 30, 2015 and 2014 exceeded the carrying amounts of such loans. There were charge-offs recorded on two collateral dependent impaired loans of $312,000 for the three and nine months ended September 30, 2015 , which are included in the preceding tables. There were no charge-offs recorded on collateral dependent impaired loans for 2014 . The allowance for loan losses associated with the TDRs presented in the preceding tables totaled $0 and $117,000 for the three months ended September 30, 2015 and 2014 , respectively, and were included in the allowance for loan losses for loans individually evaluated for impairment. For the nine months ended September 30, 2015 and 2014 , the allowance for loan losses associated with the TDRs presented in the preceding tables totaled $82,000 and $426,000 , respectively, and were included in the allowance for loan losses for loans individually evaluated for impairment. For the three and nine months ended September 30, 2015 , the TDRs presented in the preceding tables had a weighted average modified interest rate of approximately 3.00% and 5.26% , respectively, compared to a rate of 3.00% and 5.71% prior to modification, respectively. For the three and nine months ended September 30, 2014 , the TDRs had weighted average modified interest rate of approximately 5.50% and 4.90% , respectively, compared to a rate of 6.50% and 5.70% prior to modification, respectively. There were no payment defaults (90 days or more past due) at the quarter ended September 30, 2015 and 2014 related to loans modified as TDRs within the previous 12 months from September 30, 2015 and 2014. TDRs that subsequently default are considered collateral dependent impaired loans and are evaluated for impairment based on the estimated fair value of the underlying collateral less expected selling costs. PCI loans are loans acquired at a discount primarily due to deteriorated credit quality. As part of the Team Capital acquisition, $5.2 million of the loans purchased at May 30, 2014 were determined to be PCI loans. At the date of acquistion, PCI loans were 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 Team Capital at May 30, 2014 (in thousands): May 30, 2014 Contractually required principal and interest $ 12,505 Contractual cash flows not expected to be collected (non-accretable discount) (6,475 ) Expected cash flows to be collected at acquisition 6,030 Interest component of expected cash flows (accretable yield) (810 ) Fair value of acquired loans $ 5,220 PCI loans declined $839,000 to $3.7 million at September 30, 2015 , from $4.5 million at December 31, 2014, largely due to the full repayment and greater than projected cash flows on certain PCI loans. This resulted in a $129,000 and a $349,000 increase in interest income for the three and nine months ended September 30, 2015 , due to the acceleration of accretable and non-accretable discount on these loans. The following table summarizes the changes in the accretable yield for PCI loans during the three and nine months ended September 30, 2015 (in thousands): Three months ended Sept 30, Nine months ended Sept 30, 2015 2014 2015 2014 Beginning balance $ 609 $ 773 $ 695 $ — Acquisition — — — 810 Accretion (220 ) (314 ) (683 ) (351 ) Reclassification from non-accretable discount 172 136 549 136 Ending balance $ 561 $ 595 $ 561 $ 595 The activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2015 and 2014 was as follows (in thousands): Three months ended September 30, Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total 2015 Balance at beginning of period $ 31,824 22,840 4,570 59,234 390 59,624 Provision charged to operations 569 1,604 (411 ) 1,762 (362 ) 1,400 Recoveries of loans previously charged-off 3 762 352 1,117 — 1,117 Loans charged-off (774 ) (130 ) (772 ) (1,676 ) (1 ) (1,677 ) Balance at end of period $ 31,622 25,076 3,739 60,437 27 60,464 2014 Balance at beginning of period $ 31,040 27,079 4,381 62,500 1,375 63,875 Provision charged to operations 54 1,114 442 1,610 (110 ) 1,500 Recoveries of loans previously charged-off 120 404 172 696 — 696 Loans charged-off (538 ) (1,755 ) (448 ) (2,741 ) — (2,741 ) Balance at end of period $ 30,676 26,842 4,547 62,065 1,265 63,330 Nine months ended September 30, Mortgage Commercial Consumer Total Portfolio Unallocated Total 2015 Balance at beginning of period $ 31,977 24,381 4,881 61,239 495 61,734 Provision charged to operations 1,924 926 718 3,568 (468 ) 3,100 Recoveries of loans previously charged-off 139 1,636 819 2,594 — 2,594 Loans charged-off (2,418 ) (1,867 ) (2,679 ) (6,964 ) — (6,964 ) Balance at end of period $ 31,622 25,076 3,739 60,437 27 60,464 2014 Balance at beginning of period $ 34,144 24,107 4,929 63,180 1,484 64,664 Provision charged to operations (1,300 ) 4,108 811 3,619 (219 ) 3,400 Recoveries of loans previously charged-off 277 945 1,022 2,244 — 2,244 Loans charged-off (2,445 ) (2,318 ) (2,215 ) (6,978 ) — (6,978 ) Balance at end of period $ 30,676 26,842 4,547 62,065 1,265 63,330 The following table presents loans individually evaluated for impairment by class and loan category, excluding PCI loans (in thousands): September 30, 2015 December 31, 2014 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Loans with no related allowance Mortgage loans: Residential $ 12,066 8,782 — 9,018 353 14,942 10,629 — 11,138 357 Commercial 22,517 22,062 — 22,681 670 4,971 4,708 — 4,713 — Multi-family — — — — — — — — — — Construction 2,096 2,096 — 798 15 — — — — — Total 36,679 32,940 — 32,497 1,038 19,913 15,337 — 15,851 357 Commercial loans 16,672 14,666 — 14,955 221 2,718 2,179 — 1,823 4 Consumer loans 1,357 885 — 914 37 1,250 830 — 870 28 Total impaired loans $ 54,708 48,491 — 48,366 1,296 23,881 18,346 — 18,544 389 Loans with an allowance recorded Mortgage loans: Residential $ 15,260 14,614 1,959 14,489 375 15,523 14,906 2,367 15,106 555 Commercial 1,255 1,255 225 1,399 49 37,555 36,306 2,329 36,674 914 Multi-family — — — — — — — — — — Construction — — — — — — — — — — Total 16,515 15,869 2,184 15,888 424 53,078 51,212 4,696 51,780 1,469 Commercial loans 3,035 2,012 91 5,354 141 15,990 14,283 2,318 15,967 390 Consumer loans 1,527 1,517 106 1,535 56 1,565 1,554 113 1,578 80 Total impaired loans $ 21,077 19,398 2,381 22,777 621 70,633 67,049 7,127 69,325 1,939 Total impaired loans Mortgage loans: Residential $ 27,326 23,396 1,959 23,507 728 30,465 25,535 2,367 26,244 912 Commercial 23,772 23,317 225 24,080 719 42,526 41,014 2,329 41,387 914 Multi-family — — — — — — — — — — Construction 2,096 2,096 — 798 15 — — — — — Total 53,194 48,809 2,184 48,385 1,462 72,991 66,549 4,696 67,631 1,826 Commercial loans 19,707 16,678 91 20,309 362 18,708 16,462 2,318 17,790 394 Consumer loans 2,884 2,402 106 2,449 93 2,815 2,384 113 2,448 108 Total impaired loans $ 75,785 67,889 2,381 71,143 1,917 94,514 85,395 7,127 87,869 2,328 Specific allocations of the allowance for loan losses attributable to impaired loans totaled $2,381,000 and $7,127,000 at September 30, 2015 and December 31, 2014 , respectively. At September 30, 2015 and December 31, 2014 , impaired loans for which there was no related allowance for loan losses totaled $48,491,000 and $18,346,000 , respectively. The average balance of impaired loans during the nine months ended September 30, 2015 was $71,143,000 . The Company utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar characteristics. Loans deemed to be “acceptable quality” (pass) are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also confirmed through periodic loan review examinations which are currently performed by an independent third party, and their reports are presented directly to both the Audit and Risk Committees of the Board of Directors. Loans receivable by credit quality risk rating indicator, excluding PCI loans, are as follows (in thousands): At September 30, 2015 Residential Commercial mortgage Multi- family Construction Total mortgages Commercial Consumer Total loans Special mention $ 7,330 30,815 1,094 — 39,239 75,052 1,080 115,371 Substandard 11,876 39,882 1,355 2,096 55,209 35,402 4,130 94,741 Doubtful — — — — — 27 — 27 Loss — — — — — — — — Total classified and criticized 19,206 70,697 2,449 2,096 94,448 110,481 5,210 210,139 Pass/Watch 1,237,687 1,705,302 1,190,755 300,206 4,433,950 1,213,763 570,504 6,218,217 Total $ 1,256,893 1,775,999 1,193,204 302,302 4,528,398 1,324,244 575,714 6,428,356 At December 31, 2014 Residential Commercial mortgage Multi- family Construction Total mortgages Commercial Consumer Total loans Special mention $ 4,331 18,414 851 — 23,596 45,599 2,509 71,704 Substandard 17,222 53,454 322 2,600 73,598 32,828 3,938 110,364 Doubtful — 1,063 — — 1,063 29 — 1,092 Loss — — — — — — — — Total classified and criticized 21,553 72,931 1,173 2,600 98,257 78,456 6,447 183,160 Pass/Watch 1,229,892 1,621,428 1,040,409 218,502 4,110,231 1,183,966 605,020 5,899,217 Total $ 1,251,445 1,694,359 1,041,582 221,102 4,208,488 1,262,422 611,467 6,082,377" id="sjs-B4">Loans Receivable and Allowance for Loan Losses Loans receivable at September 30, 2015 and December 31, 2014 are summarized as follows (in thousands): September 30, 2015 December 31, 2014 Mortgage loans: Residential $ 1,256,893 1,251,445 Commercial 1,775,999 1,694,359 Multi-family 1,193,204 1,041,582 Construction 302,302 221,102 Total mortgage loans 4,528,398 4,208,488 Commercial loans 1,324,244 1,262,422 Consumer loans 575,714 611,467 Total gross loans 6,428,356 6,082,377 Purchased credit-impaired ("PCI") loans 3,671 4,510 Premiums on purchased loans 5,711 5,307 Unearned discounts (44 ) (53 ) Net deferred fees (6,750 ) (6,636 ) Total loans $ 6,430,944 6,085,505 The following tables summarize the aging of loans receivable by portfolio segment and class of loans, excluding PCI loans (in thousands): September 30, 2015 30-59 Days 60-89 Days Non-accrual Total Past Due and Non-accrual Current Total Loans Receivable Recorded Investment > 90 days accruing Mortgage loans: Residential $ 5,755 7,330 11,876 24,961 1,231,932 1,256,893 — Commercial 1,853 275 2,736 4,864 1,771,135 1,775,999 — Multi-family 775 — 847 1,622 1,191,582 1,193,204 — Construction — — 2,096 2,096 300,206 302,302 — Total mortgage loans 8,383 7,605 17,555 33,543 4,494,855 4,528,398 — Commercial loans 440 1,010 17,892 19,342 1,304,902 1,324,244 — Consumer loans 2,224 1,080 4,187 7,491 568,223 575,714 — Total gross loans $ 11,047 9,695 39,634 60,376 6,367,980 6,428,356 — December 31, 2014 30-59 Days 60-89 Days Non-accrual Total Past Due and Non-accrual Current Total Loans Receivable Recorded Investment > 90 days accruing Mortgage loans: Residential $ 10,121 4,331 17,222 31,674 1,219,771 1,251,445 — Commercial 146 30 20,026 20,202 1,674,157 1,694,359 — Multi-family — — 321 321 1,041,261 1,041,582 — Construction — — — — 221,102 221,102 — Total mortgage loans 10,267 4,361 37,569 52,197 4,156,291 4,208,488 — Commercial loans 1,000 371 12,342 13,713 1,248,709 1,262,422 — Consumer loans 2,398 2,509 3,944 8,851 602,616 611,467 — Total gross loans $ 13,665 7,241 53,855 74,761 6,007,616 6,082,377 — Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The principal amounts of these non-accrual loans were $39.6 million and $53.9 million at September 30, 2015 and December 31, 2014 , respectively. Included in non-accrual loans were $15.9 million and $8.4 million of loans which were less than 90 days past due at September 30, 2015 and December 31, 2014 , respectively. There were no loans 90 days or greater past due and still accruing interest at September 30, 2015 , or December 31, 2014 . The Company defines an impaired loan as a non-homogeneous loan greater than $1.0 million for which it is probable, based on current information, all amounts due under the contractual terms of the loan agreement will not be collected. Impaired loans also include all loans modified as troubled debt restructurings (“TDRs”). A loan is deemed to be a TDR when a loan modification resulting in a concession is made in an effort to mitigate potential loss arising from a borrower’s financial difficulty. Smaller balance homogeneous loans, including residential mortgages and other consumer loans, are evaluated collectively for impairment and are excluded from the definition of impaired loans, unless modified as TDRs. The Company separately calculates the reserve for loan losses on impaired loans. The Company may recognize impairment of a loan based upon: (1) the present value of expected cash flows discounted at the effective interest rate; (2) if a loan is collateral dependent, the fair value of collateral; or (3) the fair value of the loan. Additionally, if impaired loans have risk characteristics in common, those loans may be aggregated and historical statistics may be used as a means of measuring those impaired loans. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analyses of collateral dependent impaired loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral dependent impaired loan and is updated annually or more frequently, if required. A specific allocation of the allowance for loan losses is established for each collateral dependent impaired loan with a carrying balance greater than the collateral’s fair value, less estimated costs to sell. Charge-offs are generally taken for the amount of the specific allocation when operations associated with the respective property cease and it is determined that collection of amounts due will be derived primarily from the disposition of the collateral. At each quarter end, if a loan is designated as a collateral dependent impaired loan and the third party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value. The Company believes there have been no significant time lapses as a result of this process. At September 30, 2015 , there were 148 impaired loans totaling $67.9 million . Included in this total were 123 TDRs related to 121 borrowers totaling $47.9 million that were performing in accordance with their restructured terms and which continued to accrue interest at September 30, 2015 . At December 31, 2014 , there were 147 impaired loans totaling $85.4 million . Included in this total were 123 TDRs to 120 borrowers totaling $54.8 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2014 . The following table summarizes loans receivable by portfolio segment and impairment method, excluding PCI loans (in thousands): September 30, 2015 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 48,809 16,678 2,402 67,889 Collectively evaluated for impairment 4,479,589 1,307,566 573,312 6,360,467 Total gross loans $ 4,528,398 1,324,244 575,714 6,428,356 December 31, 2014 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 66,548 16,463 2,384 85,395 Collectively evaluated for impairment 4,141,940 1,245,959 609,083 5,996,982 Total gross loans $ 4,208,488 1,262,422 611,467 6,082,377 The allowance for loan losses is summarized by portfolio segment and impairment classification as follows (in thousands): September 30, 2015 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total Individually evaluated for impairment $ 2,184 91 106 2,381 — 2,381 Collectively evaluated for impairment 29,438 24,985 3,633 58,056 27 58,083 Total gross loans $ 31,622 25,076 3,739 60,437 27 60,464 December 31, 2014 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total Individually evaluated for impairment $ 4,696 2,318 113 7,127 — 7,127 Collectively evaluated for impairment 27,281 22,063 4,768 54,112 495 54,607 Total gross loans $ 31,977 24,381 4,881 61,239 495 61,734 Loan modifications to borrowers experiencing financial difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, the Company attempts to obtain additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The following tables present the number of loans modified as TDRs during the three and nine months ended September 30, 2015 and 2014 and their balances immediately prior to the modification date and post-modification as of September 30, 2015 and 2014 : For the three months ended September 30, 2015 September 30, 2014 Troubled Debt Restructuring Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment ($ in thousands) Mortgage loans: Residential 1 $ 258 $ 256 4 $ 742 $ 774 Total mortgage loans 1 258 256 4 742 774 Commercial loans — — — 1 — 367 Consumer loans — — — 2 393 165 Total restructured loans 1 $ 258 $ 256 7 $ 1,135 $ 1,306 For the nine months ended September 30, 2015 September 30, 2014 Troubled Debt Restructuring Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification ($ in thousands) Mortgage loans: Residential 6 $ 2,192 2,184 12 $ 2,705 $ 2,443 Commercial — — — 1 865 866 Construction 1 2,600 2,096 Total mortgage loans 7 4,792 4,280 13 3,570 3,309 Commercial loans 4 6,659 6,903 2 300 665 Consumer loans 2 123 115 2 393 165 Total restructured loans 13 $ 11,574 $ 11,298 17 $ 4,263 $ 4,139 All TDRs are impaired loans, which are individually evaluated for impairment, as previously discussed. Estimated collateral values of collateral dependent impaired loans modified during the three and nine months ended September 30, 2015 and 2014 exceeded the carrying amounts of such loans. There were charge-offs recorded on two collateral dependent impaired loans of $312,000 for the three and nine months ended September 30, 2015 , which are included in the preceding tables. There were no charge-offs recorded on collateral dependent impaired loans for 2014 . The allowance for loan losses associated with the TDRs presented in the preceding tables totaled $0 and $117,000 for the three months ended September 30, 2015 and 2014 , respectively, and were included in the allowance for loan losses for loans individually evaluated for impairment. For the nine months ended September 30, 2015 and 2014 , the allowance for loan losses associated with the TDRs presented in the preceding tables totaled $82,000 and $426,000 , respectively, and were included in the allowance for loan losses for loans individually evaluated for impairment. For the three and nine months ended September 30, 2015 , the TDRs presented in the preceding tables had a weighted average modified interest rate of approximately 3.00% and 5.26% , respectively, compared to a rate of 3.00% and 5.71% prior to modification, respectively. For the three and nine months ended September 30, 2014 , the TDRs had weighted average modified interest rate of approximately 5.50% and 4.90% , respectively, compared to a rate of 6.50% and 5.70% prior to modification, respectively. There were no payment defaults (90 days or more past due) at the quarter ended September 30, 2015 and 2014 related to loans modified as TDRs within the previous 12 months from September 30, 2015 and 2014. TDRs that subsequently default are considered collateral dependent impaired loans and are evaluated for impairment based on the estimated fair value of the underlying collateral less expected selling costs. PCI loans are loans acquired at a discount primarily due to deteriorated credit quality. As part of the Team Capital acquisition, $5.2 million of the loans purchased at May 30, 2014 were determined to be PCI loans. At the date of acquistion, PCI loans were 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 Team Capital at May 30, 2014 (in thousands): May 30, 2014 Contractually required principal and interest $ 12,505 Contractual cash flows not expected to be collected (non-accretable discount) (6,475 ) Expected cash flows to be collected at acquisition 6,030 Interest component of expected cash flows (accretable yield) (810 ) Fair value of acquired loans $ 5,220 PCI loans declined $839,000 to $3.7 million at September 30, 2015 , from $4.5 million at December 31, 2014, largely due to the full repayment and greater than projected cash flows on certain PCI loans. This resulted in a $129,000 and a $349,000 increase in interest income for the three and nine months ended September 30, 2015 , due to the acceleration of accretable and non-accretable discount on these loans. The following table summarizes the changes in the accretable yield for PCI loans during the three and nine months ended September 30, 2015 (in thousands): Three months ended Sept 30, Nine months ended Sept 30, 2015 2014 2015 2014 Beginning balance $ 609 $ 773 $ 695 $ — Acquisition — — — 810 Accretion (220 ) (314 ) (683 ) (351 ) Reclassification from non-accretable discount 172 136 549 136 Ending balance $ 561 $ 595 $ 561 $ 595 The activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2015 and 2014 was as follows (in thousands): Three months ended September 30, Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total 2015 Balance at beginning of period $ 31,824 22,840 4,570 59,234 390 59,624 Provision charged to operations 569 1,604 (411 ) 1,762 (362 ) 1,400 Recoveries of loans previously charged-off 3 762 352 1,117 — 1,117 Loans charged-off (774 ) (130 ) (772 ) (1,676 ) (1 ) (1,677 ) Balance at end of period $ 31,622 25,076 3,739 60,437 27 60,464 2014 Balance at beginning of period $ 31,040 27,079 4,381 62,500 1,375 63,875 Provision charged to operations 54 1,114 442 1,610 (110 ) 1,500 Recoveries of loans previously charged-off 120 404 172 696 — 696 Loans charged-off (538 ) (1,755 ) (448 ) (2,741 ) — (2,741 ) Balance at end of period $ 30,676 26,842 4,547 62,065 1,265 63,330 Nine months ended September 30, Mortgage Commercial Consumer Total Portfolio Unallocated Total 2015 Balance at beginning of period $ 31,977 24,381 4,881 61,239 495 61,734 Provision charged to operations 1,924 926 718 3,568 (468 ) 3,100 Recoveries of loans previously charged-off 139 1,636 819 2,594 — 2,594 Loans charged-off (2,418 ) (1,867 ) (2,679 ) (6,964 ) — (6,964 ) Balance at end of period $ 31,622 25,076 3,739 60,437 27 60,464 2014 Balance at beginning of period $ 34,144 24,107 4,929 63,180 1,484 64,664 Provision charged to operations (1,300 ) 4,108 811 3,619 (219 ) 3,400 Recoveries of loans previously charged-off 277 945 1,022 2,244 — 2,244 Loans charged-off (2,445 ) (2,318 ) (2,215 ) (6,978 ) — (6,978 ) Balance at end of period $ 30,676 26,842 4,547 62,065 1,265 63,330 The following table presents loans individually evaluated for impairment by class and loan category, excluding PCI loans (in thousands): September 30, 2015 December 31, 2014 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Loans with no related allowance Mortgage loans: Residential $ 12,066 8,782 — 9,018 353 14,942 10,629 — 11,138 357 Commercial 22,517 22,062 — 22,681 670 4,971 4,708 — 4,713 — Multi-family — — — — — — — — — — Construction 2,096 2,096 — 798 15 — — — — — Total 36,679 32,940 — 32,497 1,038 19,913 15,337 — 15,851 357 Commercial loans 16,672 14,666 — 14,955 221 2,718 2,179 — 1,823 4 Consumer loans 1,357 885 — 914 37 1,250 830 — 870 28 Total impaired loans $ 54,708 48,491 — 48,366 1,296 23,881 18,346 — 18,544 389 Loans with an allowance recorded Mortgage loans: Residential $ 15,260 14,614 1,959 14,489 375 15,523 14,906 2,367 15,106 555 Commercial 1,255 1,255 225 1,399 49 37,555 36,306 2,329 36,674 914 Multi-family — — — — — — — — — — Construction — — — — — — — — — — Total 16,515 15,869 2,184 15,888 424 53,078 51,212 4,696 51,780 1,469 Commercial loans 3,035 2,012 91 5,354 141 15,990 14,283 2,318 15,967 390 Consumer loans 1,527 1,517 106 1,535 56 1,565 1,554 113 1,578 80 Total impaired loans $ 21,077 19,398 2,381 22,777 621 70,633 67,049 7,127 69,325 1,939 Total impaired loans Mortgage loans: Residential $ 27,326 23,396 1,959 23,507 728 30,465 25,535 2,367 26,244 912 Commercial 23,772 23,317 225 24,080 719 42,526 41,014 2,329 41,387 914 Multi-family — — — — — — — — — — Construction 2,096 2,096 — 798 15 — — — — — Total 53,194 48,809 2,184 48,385 1,462 72,991 66,549 4,696 67,631 1,826 Commercial loans 19,707 16,678 91 20,309 362 18,708 16,462 2,318 17,790 394 Consumer loans 2,884 2,402 106 2,449 93 2,815 2,384 113 2,448 108 Total impaired loans $ 75,785 67,889 2,381 71,143 1,917 94,514 85,395 7,127 87,869 2,328 Specific allocations of the allowance for loan losses attributable to impaired loans totaled $2,381,000 and $7,127,000 at September 30, 2015 and December 31, 2014 , respectively. At September 30, 2015 and December 31, 2014 , impaired loans for which there was no related allowance for loan losses totaled $48,491,000 and $18,346,000 , respectively. The average balance of impaired loans during the nine months ended September 30, 2015 was $71,143,000 . The Company utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar characteristics. Loans deemed to be “acceptable quality” (pass) are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also confirmed through periodic loan review examinations which are currently performed by an independent third party, and their reports are presented directly to both the Audit and Risk Committees of the Board of Directors. Loans receivable by credit quality risk rating indicator, excluding PCI loans, are as follows (in thousands): At September 30, 2015 Residential Commercial mortgage Multi- family Construction Total mortgages Commercial Consumer Total loans Special mention $ 7,330 30,815 1,094 — 39,239 75,052 1,080 115,371 Substandard 11,876 39,882 1,355 2,096 55,209 35,402 4,130 94,741 Doubtful — — — — — 27 — 27 Loss — — — — — — — — Total classified and criticized 19,206 70,697 2,449 2,096 94,448 110,481 5,210 210,139 Pass/Watch 1,237,687 1,705,302 1,190,755 300,206 4,433,950 1,213,763 570,504 6,218,217 Total $ 1,256,893 1,775,999 1,193,204 302,302 4,528,398 1,324,244 575,714 6,428,356 At December 31, 2014 Residential Commercial mortgage Multi- family Construction Total mortgages Commercial Consumer Total loans Special mention $ 4,331 18,414 851 — 23,596 45,599 2,509 71,704 Substandard 17,222 53,454 322 2,600 73,598 32,828 3,938 110,364 Doubtful — 1,063 — — 1,063 29 — 1,092 Loss — — — — — — — — Total classified and criticized 21,553 72,931 1,173 2,600 98,257 78,456 6,447 183,160 Pass/Watch 1,229,892 1,621,428 1,040,409 218,502 4,110,231 1,183,966 605,020 5,899,217 Total $ 1,251,445 1,694,359 1,041,582 221,102 4,208,488 1,262,422 611,467 6,082,377 |