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Loans Receivable and Allowance for Credit Losses | 9 Months Ended
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Sep. 30, 2020
Receivables [Abstract] |
Loans Receivable and Allowance for Credit Losses | Loans Receivable and Allowance for Credit Losses On January 1, 2020, the Company adopted CECL, which replaced the incurred loss methodology with an expected loss methodology. The adoption of the new standard resulted in the Company recording a $7.9 million increase to the allowance for credit losses on loans with a corresponding cumulative effect adjustment to decrease retained earnings by $5.9 million, net of income taxes. (See Adoption of CECL table below for additional detail.) Loans receivable at September 30, 2020 and December 31, 2019 are summarized as follows (in thousands):
|  | September 30, 2020 |  | December 31, 2019
Mortgage loans: |  |  |  |
Residential |  | $ | 1,320,222 |  |  | 1,077,689 |
Commercial |  | 3,750,639 |  |  | 2,578,393 |
Multi-family |  | 1,544,924 |  |  | 1,225,551 |
Construction |  | 462,161 |  |  | 429,812 |
Total mortgage loans |  | 7,077,946 |  |  | 5,311,445 |
Commercial loans |  |  |  |
Commercial owner occupied |  | 934,104 |  |  | 853,269 |
Commercial non-owner occupied |  | 906,355 |  |  | 732,277 |
Other commercial loans |  | 449,737 |  |  | 49,213 |
Total commercial loans |  | 2,290,196 |  |  | 1,634,759 |
Consumer loans |  | 406,451 |  |  | 391,360 |
Total gross loans |  | 9,774,593 |  |  | 7,337,564 |
PCI loans prior to CECL |  | — |  |  | 746 |
Premiums on purchased loans |  | 1,514 |  |  | 2,474 |
Unearned discounts |  | (26) |  |  | (26) |
Net deferred fees |  | (19,272) |  |  | (7,873) |
Total loans |  | $ | 9,756,809 |  |  | 7,332,885 |
The following tables summarize the aging of loans receivable by portfolio segment and class of loans (in thousands). The September 30, 2020 balances include PCD loans, while the December 31, 2019 balances exclude PCI loans (in accordance with ASC 310, prior to the adoption of ASU 2016-13 on January 1, 2020):
|  | September 30, 2020
|  | 30-59 Days |  | 60-89 Days |  | Non-accrual |  | Recorded Investment > 90 days accruing |  | Total Past Due |  | Current |  | Total Loans Receivable |  | Non-accrual loans with no related allowance
Mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 8,719 |  |  | 7,215 |  |  | 9,424 |  |  | — |  |  | 25,358 |  |  | 1,294,864 |  |  | 1,320,222 |  |  | 1,491 |
Commercial |  | 3,914 |  |  | 4,629 |  |  | 16,568 |  |  | — |  |  | 25,111 |  |  | 3,725,528 |  |  | 3,750,639 |  |  | 4,134 |
Multi-family |  | — |  |  | 488 |  |  | — |  |  | — |  |  | 488 |  |  | 1,544,436 |  |  | 1,544,924 |  |  | — |
Construction |  | 7,396 |  |  | 918 |  |  | 151 |  |  | — |  |  | 8,465 |  |  | 453,696 |  |  | 462,161 |  |  | — |
Total mortgage loans |  | 20,029 |  |  | 13,250 |  |  | 26,143 |  |  | — |  |  | 59,422 |  |  | 7,018,524 |  |  | 7,077,946 |  |  | 5,625 |
Commercial loans |  | 5,575 |  |  | 949 |  |  | 21,269 |  |  | — |  |  | 27,793 |  |  | 2,262,403 |  |  | 2,290,196 |  |  | 6,060 |
Consumer loans |  | 745 |  |  | 862 |  |  | 1,541 |  |  | — |  |  | 3,148 |  |  | 403,303 |  |  | 406,451 |  |  | 9 |
Total gross loans |  | $ | 26,349 |  |  | 15,061 |  |  | 48,953 |  |  | — |  |  | 90,363 |  |  | 9,684,230 |  |  | 9,774,593 |  |  | 11,694 |
|  | December 31, 2019
|  | 30-59 Days |  | 60-89 Days |  | Non-accrual |  | Recorded Investment > 90 days accruing |  | Total Past Due |  | Current |  | Total Loans Receivable |  | Non-accrual loans with no related allowance
Mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential |  | $ | 5,905 |  |  | 2,579 |  |  | 8,543 |  |  | — |  |  | 17,027 |  |  | 1,060,662 |  |  | 1,077,689 |  |  | 2,989 |
Commercial |  | — |  |  | — |  |  | 5,270 |  |  | — |  |  | 5,270 |  |  | 2,573,123 |  |  | 2,578,393 |  |  | — |
Multi-family |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,225,551 |  |  | 1,225,551 |  |  | — |
Construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 429,812 |  |  | 429,812 |  |  | — |
Total mortgage loans |  | 5,905 |  |  | 2,579 |  |  | 13,813 |  |  | — |  |  | 22,297 |  |  | 5,289,148 |  |  | 5,311,445 |  |  | 2,989 |
Commercial loans |  | 2,383 |  |  | 95 |  |  | 25,160 |  |  | — |  |  | 27,638 |  |  | 1,607,121 |  |  | 1,634,759 |  |  | 3,238 |
Consumer loans |  | 1,276 |  |  | 337 |  |  | 1,221 |  |  | — |  |  | 2,834 |  |  | 388,526 |  |  | 391,360 |  |  | 569 |
Total gross loans |  | $ | 9,564 |  |  | 3,011 |  |  | 40,194 |  |  | — |  |  | 52,769 |  |  | 7,284,795 |  |  | 7,337,564 |  |  | 6,796 |
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 $49.0 million and $40.2 million at September 30, 2020 and December 31, 2019, respectively. Included in non-accrual loans were $4.9 million and $13.1 million of loans which were less than 90 days past due at September 30, 2020 and December 31, 2019, respectively. There were no loans 90 days or greater past due and still accruing interest at September 30, 2020 or December 31, 2019. Management has elected to measure an allowance for credit losses for accrued interest receivables specifically related to any loan that has been deferred as a result of COVID-19. Generally, accrued interest is written off by reversing interest income during the quarter the loan is moved from an accrual to a non-accrual status. The Company defines an impaired loan as a non-homogeneous loan greater than $1.0 million, for which, based on current information, the Bank does not expect to collect all amounts due under the contractual terms of the loan agreement. Impaired loans also include all loans modified as troubled debt restructurings (“TDRs”). An allowance for collateral-dependent impaired loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral-dependent loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral-dependent loan and updated annually, or more frequently if required. A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. For all classes of loans deemed collateral-dependent, the Company estimates expected credit losses based on the collateral’s fair value less any selling costs. A specific allocation of the allowance for credit losses is established for each collateral-dependent loan with a carrying balance greater than the collateral’s fair value, less estimated selling costs. In most cases, the Company records a partial charge-off to reduce the loan’s carrying value to the collateral’s fair value less estimated selling costs. At each fiscal quarter end, if a loan is designated as collateral-dependent 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 resulting from this process. At September 30, 2020, there were 151 impaired loans totaling $65.8 million. Included in this total were 122 TDRs related to 119 borrowers totaling $38.0 million that were performing in accordance with their restructured terms and which continued to accrue interest at September 30, 2020. At December 31, 2019, there were 158 impaired loans totaling $70.6 million, of which 147 loans totaling $48.3 million were TDRs. Included in this total were 133 TDRs to 128 borrowers totaling $42.7 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2019. At September 30, 2020 and December 31, 2019, the Company had $18.0 million and $20.4 million of collateral-dependent impaired loans, respectively. The collateral-dependent impaired loans at September 30, 2020 consisted of $13.2 million in commercial loans, $4.7 million in residential real estate loans, and $9,000 in consumer loans. The collateral for these impaired loans was primarily real estate. The activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2020 and 2019 was as follows (in thousands):
Three months ended September 30, |  | Mortgage loans |  | Commercial loans |  | Consumer loans |  | Total
2020 |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 54,871 |  |  | 25,284 |  |  | 6,104 |  |  | 86,259 |
Provision charged to operations |  | 2,922 |  |  | 2,767 |  |  | 722 |  |  | 6,411 |
Initial allowance on credit loans related to PCD loans |  | 11,984 |  |  | 1,582 |  |  | 20 |  |  | 13,586 |
Recoveries of loans previously charged-off |  | 35 |  |  | 679 |  |  | 144 |  |  | 858 |
Loans charged-off |  | (22) |  |  | (727) |  |  | (51) |  |  | (800) |
Balance at end of period |  | $ | 69,790 |  |  | 29,585 |  |  | 6,939 |  |  | 106,314 |
2019 |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 27,280 |  |  | 33,549 |  |  | 1,981 |  |  | 62,810 |
Provision charged to operations |  | (2,092) |  |  | 2,880 |  |  | (288) |  |  | 500 |
Recoveries of loans previously charged-off |  | 24 |  |  | 126 |  |  | 343 |  |  | 493 |
Loans charged-off |  | (131) |  |  | (6,212) |  |  | (116) |  |  | (6,459) |
Balance at end of period |  | $ | 25,081 |  |  | 30,343 |  |  | 1,920 |  |  | 57,344 |
Nine months ended September 30, |  | Mortgage loans |  | Commercial loans |  | Consumer loans |  | Total
2020 |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 25,511 |  |  | 28,263 |  |  | 1,751 |  |  | 55,525 |
Increase (decrease) due to the initial adoption of CECL - Retained earnings |  | 14,188 |  |  | (9,974) |  |  | 3,706 |  |  | 7,920 |
Initial allowance on credit loans related to PCD loans |  | 11,984 |  |  | 1,582 |  |  | 20 |  |  | 13,586 |
Provision charged to operations |  | 17,987 |  |  | 12,672 |  |  | 1,352 |  |  | 32,011 |
Recoveries of loans previously charged-off |  | 143 |  |  | 1,597 |  |  | 370 |  |  | 2,110 |
Loans charged-off |  | (23) |  |  | (4,555) |  |  | (260) |  |  | (4,838) |
Balance at end of period |  | $ | 69,790 |  |  | 29,585 |  |  | 6,939 |  |  | 106,314 |
2019 |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 27,678 |  |  | 25,693 |  |  | 2,191 |  |  | 55,562 |
Provision (credited) charged to operations |  | (2,814) |  |  | 13,337 |  |  | (323) |  |  | 10,200 |
Recoveries of loans previously charged-off |  | 361 |  |  | 291 |  |  | 596 |  |  | 1,248 |
Loans charged-off |  | (144) |  |  | (8,978) |  |  | (544) |  |  | (9,666) |
Balance at end of period |  | $ | 25,081 |  |  | 30,343 |  |  | 1,920 |  |  | 57,344 |
As a result of the January 1, 2020 adoption of CECL, the Company recorded a $7.9 million increase to the allowance for credit losses on loans. For the three and nine months ended September 30, 2020, the Company recorded a $6.4 million and $32.0 million provision for credit losses on loans, respectively. The increase in the provision for credit losses for the three and nine months ended September 30, 2020 reflects management’s best estimate of projected losses over the life of loans in our portfolio in accordance with the CECL approach, given the economic outlook and forecasts related to the COVID-19 pandemic, as well as the impact of unprecedented fiscal, monetary and regulatory interventions. The largest increase in the provision for credit losses on loans for the three and nine months ended September 30, 2020 was in the commercial real estate portfolio. The following table illustrates the impact of the January 1, 2020 adoption of CECL on the allowance for credits for the loan portfolio (in thousands):
|  | January 1, 2020
|  | As reported under CECL |  | Prior to CECL |  | Impact of CECL adoption
Loans |  |  |  |  |  |
Residential |  | $ | 8,950 |  |  | 3,411 |  |  | 5,539 |
Commercial |  | 17,118 |  |  | 12,885 |  |  | 4,233 |
Multi-family |  | 9,519 |  |  | 3,370 |  |  | 6,149 |
Construction |  | 4,152 |  |  | 5,885 |  |  | (1,733) |
Total mortgage loans |  | 39,739 |  |  | 25,551 |  |  | 14,188 |
Commercial loans |  | 18,254 |  |  | 28,228 |  |  | (9,974) |
Consumer loans |  | 5,452 |  |  | 1,746 |  |  | 3,706 |
Allowance for credit losses on loans |  | $ | 63,445 |  |  | 55,525 |  |  | 7,920 |
The following tables summarize loans receivable by portfolio segment and impairment method (in thousands):
|  | September 30, 2020
|  | Mortgage loans |  | Commercial loans |  | Consumer loans |  | Total Portfolio Segments
Individually evaluated for impairment |  | $ | 43,397 |  |  | 20,963 |  |  | 1,449 |  |  | 65,809 |
Collectively evaluated for impairment |  | 7,034,549 |  |  | 2,269,233 |  |  | 405,002 |  |  | 9,708,784 |
Total gross loans |  | $ | 7,077,946 |  |  | 2,290,196 |  |  | 406,451 |  |  | 9,774,593 |
|  | December 31, 2019
|  | Mortgage loans |  | Commercial loans |  | Consumer loans |  | Total Portfolio Segments
Individually evaluated for impairment |  | $ | 39,910 |  |  | 28,357 |  |  | 2,374 |  |  | 70,641 |
Collectively evaluated for impairment |  | 5,271,535 |  |  | 1,606,402 |  |  | 388,986 |  |  | 7,266,923 |
Total gross loans |  | $ | 5,311,445 |  |  | 1,634,759 |  |  | 391,360 |  |  | 7,337,564 |
The allowance for credit losses is summarized by portfolio segment and impairment classification as follows (in thousands):
|  | September 30, 2020
|  | Mortgage loans |  | Commercial loans |  | Consumer loans |  |  |  |  |  | Total
Individually evaluated for impairment |  | $ | 1,391 |  |  | 1,876 |  |  | 33 |  |  |  |  |  |  | 3,300 |
Collectively evaluated for impairment |  | 68,399 |  |  | 27,709 |  |  | 6,906 |  |  |  |  |  |  | 103,014 |
Total gross loans |  | $ | 69,790 |  |  | 29,585 |  |  | 6,939 |  |  |  |  |  |  | 106,314 |
|  | December 31, 2019
|  | Mortgage loans |  | Commercial loans |  | Consumer loans |  |  |  |  |  | Total
Individually evaluated for impairment |  | $ | 1,580 |  |  | 3,462 |  |  | 25 |  |  |  |  |  |  | 5,067 |
Collectively evaluated for impairment |  | 23,931 |  |  | 24,801 |  |  | 1,726 |  |  |  |  |  |  | 50,458 |
Total gross loans |  | $ | 25,511 |  |  | 28,263 |  |  | 1,751 |  |  |  |  |  |  | 55,525 |
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, management 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, 2020 and 2019, along with their balances immediately prior to the modification date and post-modification as of September 30, 2020 and 2019 (in thousands):
|  | For the three months ended
|  | September 30, 2020 |  | September 30, 2019
Troubled Debt Restructurings |  | 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 |  |  | $ | 91 |  |  | $ | 79 |  |  | — |  |  | $ | — |  |  | $ | — |
Total mortgage loans |  | 1 |  |  | 91 |  |  | 79 |  |  | — |  |  | — |  |  | — |
Commercial loans |  | 1 |  |  | 1,399 |  |  | 1,399 |  |  | — |  |  | — |  |  | — |
Consumer loans |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 20 |  |  | 16 |
Total restructured loans |  | 2 |  |  | $ | 1,490 |  |  | $ | 1,478 |  |  | 1 |  |  | $ | 20 |  |  | $ | 16 |
|  | For the nine months ended
|  | September 30, 2020 |  | September 30, 2019
Troubled Debt Restructurings |  | 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 |  | 2 |  |  | $ | 434 |  |  | $ | 360 |  |  | 2 |  |  | $ | 749 |  |  | $ | 716 |
Commercial |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 14,010 |  |  | 14,010 |
Total mortgage loans |  | 2 |  |  | 434 |  |  | 360 |  |  | 3 |  |  | 14,759 |  |  | 14,726 |
Commercial loans |  | 5 |  |  | 2,882 |  |  | 2,791 |  |  | 7 |  |  | 2,707 |  |  | 1,878 |
Consumer loans |  | — |  |  | — |  |  | — |  |  | 1 |  |  | 20 |  |  | 16 |
Total restructured loans |  | 7 |  |  | $ | 3,316 |  |  | $ | 3,151 |  |  | 11 |  |  | $ | 17,486 |  |  | $ | 16,620 |
All TDRs are impaired loans, which are individually evaluated for impairment. During the three and nine months ended September 30, 2020, $612,000 and $3.8 million of charge-offs were recorded on collateral-dependent impaired loans. During the three and nine months ended September 30, 2019, $5.7 million and $7.7 million of charge-offs were recorded on collateral-dependent impaired loans, respectively. For the nine months ended September 30, 2020, the allowance for credit losses associated with the TDRs presented in the preceding tables totaled $421,000, while there was no allowance associated with TDRs for the three months ended September 30, 2020, and was included in the allowance for credit losses for loans individually evaluated for impairment. (See page 26 for further discussion related to COVID-19 loan modifications) For the three and nine months ended September 30, 2020, the TDRs presented in the preceding tables had a weighted average modified interest rate of 4.82% and 5.46%, respectively, compared to a weighted average rate of 4.83% and 5.51% prior to modification, for the three and nine months ended September 30, 2020, respectively. The following table presents loans modified as TDRs within the previous 12 months from September 30, 2020 and 2019, and for which there was a payment default (90 days or more past due) at the quarter ended September 30, 2020 and 2019.
|  | September 30, 2020 |  | September 30, 2019
Troubled Debt Restructurings Subsequently Defaulted |  | Number of Loans |  | Outstanding Recorded Investment |  | Number of Loans |  | Outstanding Recorded Investment
|  | ($ in thousands)
Mortgage loans: |  |  |  |  |  |  |  |
Residential |  | — |  |  | $ | — |  |  | 1 |  |  | $ | 578 |
Total mortgage loans |  | — |  |  | — |  |  | 1 |  |  | 578 |
Total restructured loans |  | — |  |  | $ | — |  |  | 1 |  |  | $ | 578 |
There were no loans which had a payment default (90 days or more past due) for loans modified as TDRs within the 12 month period ending September 30, 2020. There was one payment default (90 days or more past due) to one borrower for loans modified as TDRs within the 12 month period ending September 30, 2019. For TDRs that subsequently default, the Company determines the amount of the allowance on that loan in accordance with the accounting policy for the allowance for credit losses on loans individually evaluated for impairment. As allowed by CECL, the Company elected to maintain pools of loans accounted for under ASC 310-30. At December 31, 2019, purchased credit impaired (“PCI”) loans totaled $746,000. In accordance with the CECL standard, management did not reassess whether modifications of individually acquired financial assets accounted for in pools were TDRs as of the date of adoption. Loans considered to be PCI prior to January 1, 2020 were converted to purchased credit deteriorated ("PCD") loans on that date. Any additional loans acquired by the Company after January 1, 2020, that experience more-than-insignificant deterioration in credit quality after origination, have been classified as PCD loans. The table below is a summary of the PCD loans accounted for in accordance with ASC 310-26 that were acquired in the SB One acquisition as of the July 31, 2020 closing date (in thousands):
Gross amortized cost basis at July 31, 2020 |  | $ | 315,784 |
Interest component of expected cash flows (accretable difference) |  | (7,988) |
Allowance for credit losses on PCD loans |  | (13,586) |
Net PCD loans |  | $ | 294,210 |
The following table presents loans individually evaluated for impairment by class and loan category, excluding PCD loans (in thousands):
| September 30, 2020 |  | December 31, 2019
| 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 | $ | 14,144 |  |  | 11,541 |  |  | — |  |  | 11,694 |  |  | 386 |  |  | 13,478 |  |  | 10,739 |  |  | — |  |  | 10,910 |  |  | 533 |
Commercial | 19,543 |  |  | 19,543 |  |  | — |  |  | 19,548 |  |  | 431 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total | 33,687 |  |  | 31,084 |  |  | — |  |  | 31,242 |  |  | 817 |  |  | 13,478 |  |  | 10,739 |  |  | — |  |  | 10,910 |  |  | 533 |
Commercial loans | 7,959 |  |  | 5,713 |  |  | — |  |  | 7,300 |  |  | 29 |  |  | 3,927 |  |  | 3,696 |  |  | — |  |  | 4,015 |  |  | 17 |
Consumer loans | 1,396 |  |  | 895 |  |  | — |  |  | 921 |  |  | 39 |  |  | 2,086 |  |  | 1,517 |  |  | — |  |  | 1,491 |  |  | 86 |
Total impaired loans | $ | 43,042 |  |  | 37,692 |  |  | — |  |  | 39,463 |  |  | 885 |  |  | 19,491 |  |  | 15,952 |  |  | — |  |  | 16,416 |  |  | 636 |
Loans with an allowance recorded |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential | $ | 7,922 |  |  | 7,503 |  |  | 728 |  |  | 7,440 |  |  | 235 |  |  | 10,860 |  |  | 10,326 |  |  | 829 |  |  | 10,454 |  |  | 428 |
Commercial | 4,810 |  |  | 4,810 |  |  | 663 |  |  | 4,822 |  |  | 41 |  |  | 18,845 |  |  | 18,845 |  |  | 751 |  |  | 18,862 |  |  | 569 |
Total | 12,732 |  |  | 12,313 |  |  | 1,391 |  |  | 12,262 |  |  | 276 |  |  | 29,705 |  |  | 29,171 |  |  | 1,580 |  |  | 29,316 |  |  | 997 |
Commercial loans | 17,050 |  |  | 15,250 |  |  | 1,876 |  |  | 18,280 |  |  | 293 |  |  | 27,762 |  |  | 24,661 |  |  | 3,462 |  |  | 27,527 |  |  | 444 |
Consumer loans | 569 |  |  | 554 |  |  | 33 |  |  | 560 |  |  | 13 |  |  | 868 |  |  | 857 |  |  | 25 |  |  | 878 |  |  | 46 |
Total impaired loans | $ | 30,351 |  |  | 28,117 |  |  | 3,300 |  |  | 31,102 |  |  | 582 |  |  | 58,335 |  |  | 54,689 |  |  | 5,067 |  |  | 57,721 |  |  | 1,487 |
Total impaired loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Residential | $ | 22,066 |  |  | 19,044 |  |  | 728 |  |  | 19,134 |  |  | 621 |  |  | 24,338 |  |  | 21,065 |  |  | 829 |  |  | 21,364 |  |  | 961 |
Commercial | 24,353 |  |  | 24,353 |  |  | 663 |  |  | 24,370 |  |  | 472 |  |  | 18,845 |  |  | 18,845 |  |  | 751 |  |  | 18,862 |  |  | 569 |
Total | 46,419 |  |  | 43,397 |  |  | 1,391 |  |  | 43,504 |  |  | 1,093 |  |  | 43,183 |  |  | 39,910 |  |  | 1,580 |  |  | 40,226 |  |  | 1,530 |
Commercial loans | 25,009 |  |  | 20,963 |  |  | 1,876 |  |  | 25,580 |  |  | 322 |  |  | 31,689 |  |  | 28,357 |  |  | 3,462 |  |  | 31,542 |  |  | 461 |
Consumer loans | 1,965 |  |  | 1,449 |  |  | 33 |  |  | 1,481 |  |  | 52 |  |  | 2,954 |  |  | 2,374 |  |  | 25 |  |  | 2,369 |  |  | 132 |
Total impaired loans | $ | 73,393 |  |  | 65,809 |  |  | 3,300 |  |  | 70,565 |  |  | 1,467 |  |  | 77,826 |  |  | 70,641 |  |  | 5,067 |  |  | 74,137 |  |  | 2,123 |
Specific allocations of the allowance for credit losses attributable to impaired loans totaled $3.3 million at September 30, 2020 and $5.1 million at December 31, 2019. At September 30, 2020 and December 31, 2019, impaired loans for which there was no related allowance for credit losses totaled $37.7 million and $16.0 million, respectively. The average balance of impaired loans for the nine months ended September 30, 2020 and December 31, 2019 was $70.6 million and $74.1 million, respectively. Management utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” 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. Reports by the independent third-party are presented directly to the Audit Committee of the Board of Directors. In response to the COVID-19 pandemic and its adverse economic impact on both our commercial and retail borrowers, the Company implemented a modification program to defer principal or principal and interest payments for borrowers directly impacted by the pandemic and who were not more than 30 days past due as of December 31, 2019, all in accordance with the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. Loans that have been or are expected to be granted COVID-19 related deferrals or modifications have decreased from a peak level of $1.31 billion, or 16.8% of loans, to $310.8 million, or 3.2% of loans as of October 16, 2020. This $310.8 million of loans includes $47.5 million acquired from SB One and consists of $27.0 million in a first 90-day deferral period, $84.9 million in a second 90-day deferral period, and $198.9 million that have completed their initial deferral periods, but are expected to require ongoing assistance. Included in the $310.8 million of loans, $92.4 million are secured by hotels, $43.7 million are secured by retail properties, $31.4 million are secured by restaurants, $15.1 million are secured by suburban office space, and $42.7 million are secured by residential mortgages, with the balance comprised of diverse commercial loans. In accordance with the CARES Act, the Company has elected to not apply troubled debt restructuring classification to any COVID-19 related loan modifications that were performed after March 1, 2020 to borrowers who were current as of December 31, 2019. Accordingly, these modifications are not classified as troubled debt restructurings (“TDRs”). In addition, the Company participated in the Paycheck Protection Program (“PPP”) through the United States Department of the Treasury and Small Business Administration ("SBA"). As of September 30, 2020, the Company secured 1,289 PPP loans for its customers totaling $474.8 million. The PPP loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan was made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. PPP loans are included in the commercial loan portfolio. The following table summarizes the Company's gross loans held for investment by year of origination and internally assigned credit grades (in thousands):
|  | At September 30, 2020
Total portfolio |  | Residential |  | Commercial mortgage |  | Multi-family |  | Construction |  | Total mortgages |  | Commercial |  | Consumer |  | Total Loans (1)
Special mention |  | $ | 4,483 |  |  | 54,368 |  |  | 101 |  |  | 872 |  |  | 59,824 |  |  | 168,833 |  |  | 362 |  |  | 229,019 |
Substandard |  | 41,255 |  |  | 52,847 |  |  | 124 |  |  | — |  |  | 94,226 |  |  | 103,132 |  |  | 3,680 |  |  | 201,038 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 76 |  |  | — |  |  | 76 |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 45,738 |  |  | 107,215 |  |  | 225 |  |  | 872 |  |  | 154,050 |  |  | 272,041 |  |  | 4,042 |  |  | 430,133 |
Pass/Watch |  | 1,274,484 |  |  | 3,643,424 |  |  | 1,544,699 |  |  | 461,289 |  |  | 6,923,896 |  |  | 2,018,155 |  |  | 402,409 |  |  | 9,344,460 |
Total |  | $ | 1,320,222 |  |  | 3,750,639 |  |  | 1,544,924 |  |  | 462,161 |  |  | 7,077,946 |  |  | 2,290,196 |  |  | 406,451 |  |  | 9,774,593 |
2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Special mention |  | $ | — |  |  | — |  |  | — |  |  | 872 |  |  | 872 |  |  | 657 |  |  | — |  |  | 1,529 |
Substandard |  | 2,079 |  |  | — |  |  | — |  |  | — |  |  | 2,079 |  |  | — |  |  | 25 |  |  | 2,104 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 2,079 |  |  | — |  |  | — |  |  | 872 |  |  | 2,951 |  |  | 657 |  |  | 25 |  |  | 3,633 |
Pass/Watch |  | 198,722 |  |  | 375,324 |  |  | 230,034 |  |  | 28,187 |  |  | 832,267 |  |  | 586,510 |  |  | 27,605 |  |  | 1,446,382 |
Total gross loans |  | $ | 200,801 |  |  | 375,324 |  |  | 230,034 |  |  | 29,059 |  |  | 835,218 |  |  | 587,167 |  |  | 27,630 |  |  | 1,450,015 |
2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Special mention |  | $ | 1,753 |  |  | $ | 12,434 |  |  | $ | — |  |  | $ | — |  |  | $ | 14,187 |  |  | $ | 6,755 |  |  | $ | — |  |  | $ | 20,942 |
Substandard |  | 6,321 |  |  | — |  |  | — |  |  | — |  |  | 6,321 |  |  | 2,742 |  |  | 343 |  |  | 9,406 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 8,074 |  |  | 12,434 |  |  | — |  |  | — |  |  | 20,508 |  |  | 9,497 |  |  | 343 |  |  | 30,348 |
Pass/Watch |  | 139,391 |  |  | 547,969 |  |  | 139,633 |  |  | 164,333 |  |  | 991,326 |  |  | 225,447 |  |  | 46,745 |  |  | 1,263,518 |
Total gross loans |  | $ | 147,465 |  |  | 560,403 |  |  | 139,633 |  |  | 164,333 |  |  | 1,011,834 |  |  | 234,944 |  |  | 47,088 |  |  | 1,293,866 |
2018 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Special mention |  | $ | 318 |  |  | 6,630 |  |  | — |  |  | — |  |  | 6,948 |  |  | 10,908 |  |  | — |  |  | 17,856 |
Substandard |  | 2,152 |  |  | — |  |  | — |  |  | — |  |  | 2,152 |  |  | 4,948 |  |  | 356 |  |  | 7,456 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 2,470 |  |  | 6,630 |  |  | — |  |  | — |  |  | 9,100 |  |  | 15,856 |  |  | 356 |  |  | 25,312 |
Pass/Watch |  | 79,552 |  |  | 361,309 |  |  | 171,555 |  |  | 119,980 |  |  | 732,396 |  |  | 169,974 |  |  | 40,927 |  |  | 943,297 |
Total gross loans |  | $ | 82,022 |  |  | 367,939 |  |  | 171,555 |  |  | 119,980 |  |  | 741,496 |  |  | 185,830 |  |  | 41,283 |  |  | 968,609 |
2017 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Special mention |  | $ | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 31,465 |  |  | — |  |  | 31,465 |
Substandard |  | 3,233 |  |  | 17,529 |  |  | — |  |  | — |  |  | 20,762 |  |  | 8,040 |  |  | 15 |  |  | 28,817 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 3,233 |  |  | 17,529 |  |  | — |  |  | — |  |  | 20,762 |  |  | 39,505 |  |  | 15 |  |  | 60,282 |
Pass/Watch |  | 80,813 |  |  | 387,846 |  |  | 134,166 |  |  | 37,564 |  |  | 640,389 |  |  | 148,737 |  |  | 33,340 |  |  | 822,466 |
Total gross loans |  | $ | 84,046 |  |  | 405,375 |  |  | 134,166 |  |  | 37,564 |  |  | 661,151 |  |  | 188,242 |  |  | 33,355 |  |  | 882,748 |
2016 and prior |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Special mention |  | $ | 2,412 |  |  | 35,304 |  |  | 101 |  |  | — |  |  | 37,817 |  |  | 119,048 |  |  | 362 |  |  | 157,227 |
Substandard |  | 27,470 |  |  | 35,318 |  |  | 124 |  |  | — |  |  | 62,912 |  |  | 87,402 |  |  | 2,941 |  |  | 153,255 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 76 |  |  | — |  |  | 76 |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 29,882 |  |  | 70,622 |  |  | 225 |  |  | — |  |  | 100,729 |  |  | 206,526 |  |  | 3,303 |  |  | 310,558 |
Pass/Watch |  | 805,888 |  |  | 2,041,598 |  |  | 869,536 |  |  | 111,225 |  |  | 3,828,247 |  |  | 1,094,013 |  |  | 257,095 |  |  | 5,179,355 |
Total gross loans |  | $ | 835,770 |  |  | 2,112,220 |  |  | 869,761 |  |  | 111,225 |  |  | 3,928,976 |  |  | 1,300,539 |  |  | 260,398 |  |  | 5,489,913 |
|  | At December 31, 2019
|  | Residential |  | Commercial mortgage |  | Multi-family |  | Construction |  | Total mortgages |  | Commercial |  | Consumer |  | Total loans
Special mention |  | $ | 2,402 |  |  | 46,758 |  |  | — |  |  | — |  |  | 49,160 |  |  | 79,248 |  |  | 286 |  |  | 128,694 |
Substandard |  | 10,204 |  |  | 13,458 |  |  | — |  |  | 6,181 |  |  | 29,843 |  |  | 57,015 |  |  | 1,668 |  |  | 88,526 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 836 |  |  | — |  |  | 836 |
Loss |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total criticized and classified |  | 12,606 |  |  | 60,216 |  |  | — |  |  | 6,181 |  |  | 79,003 |  |  | 137,099 |  |  | 1,954 |  |  | 218,056 |
Pass/Watch |  | 1,065,083 |  |  | 2,518,177 |  |  | 1,225,551 |  |  | 423,631 |  |  | 5,232,442 |  |  | 1,497,660 |  |  | 389,406 |  |  | 7,119,508 |
Total |  | $ | 1,077,689 |  |  | 2,578,393 |  |  | 1,225,551 |  |  | 429,812 |  |  | 5,311,445 |  |  | 1,634,759 |  |  | 391,360 |  |  | 7,337,564 |
(1) Contained within criticized and classified loans at September 30, 2020 are loans that were granted payment deferrals related to COVID-19 totaling $310.8 million.

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -URI http://asc.fasb.org/subtopic&trid=2196772 + Details
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