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Loans and the Allowance for Loan Losses | 9 Months Ended
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Sep. 30, 2019
Receivables [Abstract] |
Loans and the Allowance for Loan Losses | Note 6. Loans and the Allowance for Loan Losses Loans receivable - The following table sets forth the composition of the Company’s loan portfolio, including net deferred loan fees, at September 30, 2019 and December 31, 2018:
| September 30, 2019 |  | December 31, 2018
| (dollars in thousands)
Commercial | $ | 1,113,743 |  |  | $ | 988,758 |
Commercial real estate |  | 3,030,816 |  |  |  | 2,778,167 |
Commercial construction |  | 646,172 |  |  |  | 465,389 |
Residential real estate |  | 322,307 |  |  |  | 309,991 |
Consumer |  | 2,435 |  |  |  | 2,594 |
Gross loans |  | 5,115,473 |  |  |  | 4,544,899 |
Net deferred loan fees |  | (5,002 | ) |  |  | (3,807 | )
Total loans receivable | $ | 5,110,471 |  |  | $ | 4,541,092 |
At September 30, 2019 and December 31, 2018, loan balances of approximately $2.5 billion and $2.3 billion, respectively, were pledged to secure borrowings from the FHLB of New York. Loans held-for-sale - The following table sets forth the composition of the Company's loans held-for-sale portfolio at September 30, 2019 and December 31, 2018:
| September 30, 2019 |  | December 31, 2018
|  | (dollars in thousands)
Commercial | $ | 2,294 |  | $ | -
Commercial real estate |  | 29,353 |  |  | -
Residential real estate |  | 1,598 |  |  | -
Total carrying amount | $ | 33,245 |  | $ | -
Purchased Credit-Impaired Loans - The Company holds purchased loans for which there was, at their acquisition date, evidence of deterioration of credit quality since their origination and it was probable, at acquisition, that all contractually required payments would not be collected. The recorded investment in those loans is as follows at September 30, 2019 and December 31, 2018.
| September 30, 2019 |  | December 31, 2018
|  | (dollars in thousands)
Commercial | $ | 5,459 |  | $ | 2,509
Commercial real estate |  | 1,123 |  |  | -
| $ | 6,582 |  | $ | 2,509
For those purchased loans disclosed above, the Company did not increase the allowance for loan losses during either the three and nine months ended September 30, 2019 and September 30, 2018. There were no reversals from the allowance for loan losses during the three and nine months ended September 30, 2019 and September 30, 2018. 20 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) The following table presents the accretable yield, or income expected to be collected, on the purchased credit-impaired loans for three and nine months ended September 30, 2019 and September 30, 2018:
| Three Months Ended September 30, 2019 |  | Three Months Ended September 30, 2018
| (dollars in thousands)
Balance at June 30 | $ | 1,637 |  |  | $ | 1,259 |
Accretion of income |  | (167 | ) |  |  | (63 | )
Balance at September 30 | $ | 1,470 |  |  | $ | 1,196 |
| Nine Months Ended September 30, 2019 |  | Nine Months Ended September 30, 2018
| (dollars in thousands)
Balance at January 1 | $ | 1,134 |  |  | $ | 1,387 |
New loans purchased |  | 1,286 |  |  |  | - |
Accretion of income |  | (950 | ) |  |  | (191 | )
Balance at September 30 | $ | 1,470 |  |  | $ | 1,196 |
Loans Receivable on Nonaccrual Status - The following tables present nonaccrual loans included in loans receivable by loan class as of September 30, 2019 and December 31, 2018:
| September 30, 2019 |  | December 31, 2018
| (dollars in thousands)
Commercial | $ | 33,781 |  |  | $ | 29,340 |
Commercial real estate |  | 7,529 |  |  |  | 15,135 |
Commercial construction |  | 7,101 |  |  |  | 2,934 |
Residential real estate |  | 2,910 |  |  |  | 4,446 |
Total nonaccrual loans | $ | 51,321 |  |  | $ | 51,855 |
Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and loans individually evaluated for impairment. 21 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) Credit Quality Indicators - The Company continuously monitors the credit quality of its loans receivable. In addition to its internal monitoring, the Company utilizes the services of a third-party loan review firm to periodically validate the credit quality of its loans receivable on a sample basis. Credit quality is monitored by reviewing certain credit quality indicators. Assets classified “Pass” are deemed to possess average to superior credit quality, requiring no more than normal attention. Assets classified as “Special Mention” have generally acceptable credit quality yet possess higher risk characteristics/circumstances than satisfactory assets. Such conditions include strained liquidity, slow pay, stale financial statements, or other conditions that require more stringent attention from the lending staff. These conditions, if not corrected, may weaken the loan quality or inadequately protect the Company’s credit position at some future date. Assets are classified “Substandard” if the asset has a well-defined weakness that requires management’s attention to a greater degree than for loans classified special mention. Such weakness, if left uncorrected, could possibly result in the compromised ability of the loan to perform to contractual requirements. An asset is classified as “Doubtful” if it is inadequately protected by the net worth and/or paying capacity of the obligor or of the collateral, if any, that secures the obligation. Assets classified as doubtful include assets for which there is a “distinct possibility” that a degree of loss will occur if the inadequacies are not corrected. All loans past due 90 days or greater and all impaired loans are included in the appropriate category below. The following table presents information about the loan credit quality by loan class of gross loans (which exclude net deferred fees) at September 30, 2019 and December 31, 2018:
| September 30, 2019
| Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total
|  | (dollars in thousands)
Commercial | $ | 1,040,210 |  | $ | 23,219 |  | $ | 50,314 |  | $ | - |  | $ | 1,113,743
Commercial real estate |  | 3,007,226 |  |  | 6,418 |  |  | 17,172 |  |  | - |  |  | 3,030,816
Commercial construction |  | 629,778 |  |  | 1,918 |  |  | 14,475 |  |  | - |  |  | 646,172
Residential real estate |  | 318,754 |  |  | - |  |  | 3,553 |  |  | - |  |  | 322,307
Consumer |  | 2,434 |  |  | - |  |  | 1 |  |  | - |  |  | 2,435
Gross loans | $ | 4,998,403 |  | $ | 31,555 |  | $ | 85,515 |  | $ | - |  | $ | 5,115,473
| December 31, 2018
| Pass |  | Special Mention |  | Substandard |  | Doubtful |  | Total
|  | (dollars in thousands)
Commercial | $ | 951,610 |  | $ | 3,371 |  | $ | 33,777 |  | $ | - |  | $ | 988,758
Commercial real estate |  | 2,742,989 |  |  | 12,574 |  |  | 22,604 |  |  | - |  |  | 2,778,167
Commercial construction |  | 453,598 |  |  | 5,515 |  |  | 6,276 |  |  | - |  |  | 465,389
Residential real estate |  | 305,414 |  |  | - |  |  | 4,577 |  |  | - |  |  | 309,991
Consumer |  | 2,576 |  |  | - |  |  | 18 |  |  | - |  |  | 2,594
Gross loans | $ | 4,456,187 |  | $ | 21,460 |  | $ | 67,252 |  | $ | - |  | $ | 4,544,899
22 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) The following table provides an analysis of the impaired loans by segment as of September 30, 2019 and December 31, 2018:
| September 30, 2019
| Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance
No related allowance recorded | (dollars in thousands)
Commercial | $ | 41,030 |  | $ | 87,716 |  |  |
Commercial real estate |  | 12,136 |  |  | 12,301 |  |  |
Commercial construction |  | 6,079 |  |  | 6,085 |  |  |
Residential real estate |  | 1,533 |  |  | 1,897 |  |  |
Total (no related allowance) | $ | 60,778 |  | $ | 107,999 |  |  |
With an allowance recorded |  |  |  |  |  |  |  |
Commercial real estate | $ | 388 |  | $ | 388 |  | $ | 23
Commercial construction |  | 6,467 |  |  | 6,467 |  |  | 1,339
Residential real estate |  | 264 |  |  | 264 |  |  | 24
Total (with allowance) | $ | 7,119 |  | $ | 7,119 |  | $ | 1,386
Total |  |  |  |  |  |  |  |
Commercial | $ | 41,030 |  | $ | 87,716 |  | $ | -
Commercial real estate |  | 12,524 |  |  | 12,689 |  |  | 23
Commercial construction |  | 12,546 |  |  | 12,552 |  |  | 1,339
Residential real estate |  | 1,797 |  |  | 2,161 |  |  | 24
Total | $ | 67,897 |  | $ | 115,118 |  | $ | 1,386
| December 31, 2018
| Recorded Investment |  | Unpaid Principal Balance |  | Related Allowance
No related allowance recorded | (dollars in thousands)
Commercial | $ | 29,896 |  | $ | 83,596 |  |  |
Commercial real estate |  | 16,839 |  |  | 17,935 |  |  |
Commercial construction |  | 9,240 |  |  | 9,240 |  |  |
Residential real estate |  | 2,209 |  |  | 2,521 |  |  |
Total (no related allowance) | $ | 58,184 |  | $ | 113,292 |  |  |
With an allowance recorded |  |  |  |  |  |  |  |
Commercial real estate | $ | 1,488 |  | $ | 1,488 |  | $ | 7
Residential real estate |  | 260 |  |  | 266 |  |  | 29
| $ | 1,748 |  | $ | 1,754 |  | $ | 36
Total |  |  |  |  |  |  |  |
Commercial | $ | 29,896 |  | $ | 83,596 |  | $ | -
Commercial real estate |  | 18,327 |  |  | 19,423 |  |  | 7
Commercial construction |  | 9,240 |  |  | 9,240 |  |  | -
Residential real estate |  | 2,469 |  |  | 2,787 |  |  | 29
Total | $ | 59,932 |  | $ | 115,046 |  | $ | 36
23 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) The following table provides an analysis related to the average recorded investment and interest income recognized on impaired loans by segment as of and for the three and nine months ended September 30, 2019 and 2018:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2019 |  | 2018 |  | 2019 |  | 2018
| Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized |  | Average Recorded Investment |  | Interest Income Recognized
| (dollars in thousands)
Impaired loans (no allowance) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 41,332 |  | $ | 570 |  | $ | 31,769 |  | $ | 36 |  | $ | 41,731 |  | $ | 733 |  | $ | 39,132 |  | $ | 102
Commercial real estate |  | 12,178 |  |  | 79 |  |  | 21,557 |  |  | 105 |  |  | 12,213 |  |  | 221 |  |  | 21,714 |  |  | 475
Commercial construction |  | 6,044 |  |  | 58 |  |  | 10,297 |  |  | 92 |  |  | 6,047 |  |  | 138 |  |  | 11,718 |  |  | 387
Residential real estate |  | 1,552 |  |  | - |  |  | 2,249 |  |  | - |  |  | 1,579 |  |  | 19 |  |  | 2,304 |  |  | -
Total | $ | 61,106 |  | $ | 707 |  | $ | 65,872 |  | $ | 233 |  | $ | 61,570 |  | $ | 1,111 |  | $ | 74,868 |  | $ | 964
Impaired loans (allowance): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 392 |  | $ | - |  | $ | 8,534 |  | $ | 11 |  | $ | 393 |  | $ | - |  | $ | 8,544 |  | $ | 34
Commercial construction |  | 6,439 |  |  | 220 |  |  | - |  |  | - |  |  | 6,378 |  |  | 220 |  |  | - |  |  | -
Residential real estate |  | 252 |  |  | 9 |  |  | 264 |  |  | - |  |  | 255 |  |  | 9 |  |  | 267 |  |  | -
Total | $ | 7,083 |  | $ | 936 |  | $ | 8,798 |  | $ | 11 |  | $ | 7,026 |  | $ | 229 |  | $ | 8,811 |  | $ | 34
Total impaired loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 41,332 |  | $ | 570 |  | $ | 31,769 |  | $ | 36 |  | $ | 41,731 |  | $ | 733 |  | $ | 39,132 |  | $ | 102
Commercial real estate |  | 12,570 |  |  | 79 |  |  | 30,091 |  |  | 116 |  |  | 12,606 |  |  | 221 |  |  | 30,258 |  |  | 509
Commercial construction |  | 12,483 |  |  | 278 |  |  | 10,297 |  |  | 92 |  |  | 12,425 |  |  | 358 |  |  | 11,718 |  |  | 387
Residential real estate |  | 1,804 |  |  | 9 |  |  | 2,513 |  |  | - |  |  | 1,834 |  |  | 28 |  |  | 2,571 |  |  | -
Total | $ | 68,189 |  | $ | 936 |  | $ | 74,760 |  | $ | 244 |  | $ | 68,596 |  | $ | 1,340 |  | $ | 83,679 |  | $ | 998
Included in impaired loans at September 30, 2019 and December 31, 2018 are loans that are deemed troubled debt restructurings. The recorded investment in loans include accrued interest receivable and other capitalized costs such as real estate taxes paid on behalf of the borrower and loan origination fees, net, when applicable. Cash basis interest and interest income recognized on accrual basis approximate each other. 24 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) Aging Analysis - The following table provides an analysis of the aging of the loans by class, excluding net deferred fees, that are past due at September 30, 2019 and December 31, 2018:
| September 30, 2019
| 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 Days or Greater Past Due and Still Accruing |  | Nonaccrual |  | Total Past Due and Nonaccrual |  | Current |  | Gross Loans
|  | (dollars in thousands)
Commercial | $ | 5,812 |  | $ | 1,438 |  | $ | 3,098 |  | $ | 33,781 |  | $ | 44,129 |  | $ | 1,069,614 |  | $ | 1,113,743
Commercial real estate |  | - |  |  | 689 |  |  | - |  |  | 7,529 |  |  | 8,218 |  |  | 3,022,598 |  |  | 3,030,816
Commercial construction |  | - |  |  | - |  |  | - |  |  | 7,101 |  |  | 7,101 |  |  | 639,071 |  |  | 646,172
Residential real estate |  | 698 |  |  | - |  |  | - |  |  | 2,910 |  |  | 3,608 |  |  | 318,699 |  |  | 322,307
Consumer |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 2,435 |  |  | 2,435
Total | $ | 6,510 |  | $ | 2,127 |  | $ | 3,098 |  | $ | 51,321 |  | $ | 63,056 |  | $ | 5,052,417 |  | $ | 5,115,473
Included in the 90 days or greater past due and still accruing category as of September 30, 2019 are purchased credit-impaired loans, net of fair value marks, which accretes income per the valuation at date of acquisition.
| December 31, 2018
| 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90 Days or Greater Past Due and Still Accruing |  | Nonaccrual |  | Total Past Due and Nonaccrual |  | Current |  | Gross Loans
|  | (dollars in thousands)
Commercial | $ | 1,673 |  | $ | - |  | $ | 1,647 |  | $ | 29,340 |  | $ | 32,660 |  | $ | 956,098 |  | $ | 988,758
Commercial real estate |  | 6,162 |  |  | 1,840 |  |  | - |  |  | 15,135 |  |  | 23,137 |  |  | 2,755,030 |  |  | 2,778,167
Commercial construction |  | 2,496 |  |  | 564 |  |  | - |  |  | 2,934 |  |  | 5,994 |  |  | 459,395 |  |  | 465,389
Residential real estate |  | 3,455 |  |  | 119 |  |  | - |  |  | 4,446 |  |  | 8,020 |  |  | 301,971 |  |  | 309,991
Consumer |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 2,594 |  |  | 2,594
Total | $ | 13,786 |  | $ | 2,523 |  | $ | 1,647 |  | $ | 51,855 |  | $ | 69,811 |  | $ | 4,475,088 |  | $ | 4,544,899
Included in the 90 days or greater past due and still accruing category as of December 31, 2018 are purchased credit-impaired loans, net of fair value marks, which accretes income per the valuation at date of acquisition. 25 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) The following tables detail, at the period-end presented, the amount of gross loans (excluding loans held-for-sale) that are evaluated individually, and collectively, for impairment, those acquired with deteriorated quality, and the related portion of the allowance for loan losses that are allocated to each loan portfolio segment:
| September 30, 2019
| Commercial |  | Commercial real estate |  | Commercial construction |  | Residential real estate |  | Consumer |  | Unallocated |  | Total
| (dollars in thousands)
ALLL |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | - |  | $ | 23 |  | $ | 1,339 |  | $ | 24 |  | $ | - |  | $ | - |  | $ | 1,386
Collectively evaluated for impairment |  | 8,125 |  |  | 19,987 |  |  | 5,836 |  |  | 1,737 |  |  | 4 |  |  | 496 |  |  | 36,185
Acquired portfolio |  | 200 |  |  | 1,000 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 1,200
Acquired with deteriorated credit quality |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Total | $ | 8,325 |  | $ | 21,010 |  | $ | 7,175 |  | $ | 1,761 |  | $ | 4 |  | $ | 496 |  | $ | 38,771
Gross loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 41,030 |  | $ | 12,524 |  | $ | 12,545 |  | $ | 1,797 |  |  | $- |  |  |  |  | $ | 67,896
Collectively evaluated for impairment |  | 977,895 |  |  | 2,645,903 |  |  | 597,352 |  |  | 276,457 |  |  | 2,162 |  |  |  |  |  | 4,499,769
Acquired portfolio |  | 89,359 |  |  | 371,266 |  |  | 36,275 |  |  | 44,053 |  |  | 273 |  |  |  |  |  | 541,226
Acquired with deteriorated credit quality |  | 5,459 |  |  | 1,123 |  |  | - |  |  | - |  |  | - |  |  |  |  |  | 6,582
Total | $ | 1,113,743 |  | $ | 3,030,816 |  | $ | 646,172 |  | $ | 322,307 |  | $ | 2,435 |  |  |  |  | $ | 5,115,473
| December 31, 2018
| Commercial |  | Commercial real estate |  | Commercial construction |  | Residential real estate |  | Consumer |  | Unallocated |  | Total
| (dollars in thousands)
Allowance for loan losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | - |  | $ | 7 |  | $ | - |  | $ | 29 |  | $ | - |  | $ | - |  | $ | 36
Collectively evaluated for impairment |  | 9,675 |  |  | 17,840 |  |  | 4,519 |  |  | 1,237 |  |  | 2 |  |  | 445 |  |  | 33,718
Acquired portfolio |  | 200 |  |  | 1,000 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 1,200
Acquired with deteriorated credit quality |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | -
Total | $ | 9,875 |  | $ | 18,847 |  | $ | 4,519 |  | $ | 1,266 |  | $ | 2 |  | $ | 445 |  | $ | 34,954
Gross loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 29,896 |  | $ | 18,327 |  | $ | 9,240 |  | $ | 2,469 |  | $ | - |  |  |  |  | $ | 59,932
Collectively evaluated for impairment |  | 949,129 |  |  | 2,500,132 |  |  | 456,149 |  |  | 263,449 |  |  | 2,484 |  |  |  |  |  | 4,171,343
Acquired portfolio |  | 7,224 |  |  | 259,708 |  |  | - |  |  | 44,073 |  |  | 110 |  |  |  |  |  | 311,115
Acquired with deteriorated credit quality |  | 2,509 |  |  | - |  |  | - |  |  | - |  |  | - |  |  |  |  |  | 2,509
Total | $ | 988,758 |  | $ | 2,778,167 |  | $ | 465,389 |  | $ | 309,991 |  | $ | 2,594 |  |  |  |  | $ | 4,544,899
26 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) The Company’s allowance for loan losses is analyzed quarterly. Many factors are considered, including growth in the portfolio, delinquencies, nonaccrual loan levels, and other factors inherent in the extension of credit. There have been no material changes to the allowance for loan losses (“ALLL”) methodology as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. A summary of the activity in the ALLL is as follows:
| Three Months Ended September 30, 2019
| Commercial |  | Commercial real estate |  | Commercial construction |  | Residential real estate |  | Consumer |  | Unallocated |  | Total
| (dollars in thousands)
Balance at June 30, 2019 | $ | 8,721 |  |  | $ | 21,485 |  |  | $ | 5,542 |  |  | $ | 1,208 |  |  | $ | 2 |  |  | $ | 740 |  |  | $ | 37,698 |
Charge-offs |  | - |  |  |  | (387 | ) |  |  | - |  |  |  | (557 | ) |  |  | (20 | ) |  |  | - |  |  |  | (964 | )
Recoveries |  | 28 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 37 |
Provision |  | (424 | ) |  |  | (88 | ) |  |  | 1,633 |  |  |  | 1,110 |  |  |  | 13 |  |  |  | (244 | ) |  |  | 2,000 |
Balance at September 30, 2019 | $ | 8,325 |  |  | $ | 21,010 |  |  | $ | 7,175 |  |  | $ | 1,761 |  |  | $ | 4 |  |  | $ | 496 |  |  | $ | 38,771 |
| Three Months Ended September 30, 2018
| Commercial |  | Commercial real estate |  | Commercial construction |  | Residential real estate |  | Consumer |  | Unallocated |  | Total
| (dollars in thousands)
Balance at June 30, 2018 | $ | 8,960 |  |  | $ | 18,221 |  |  | $ | 4,812 |  |  | $ | 1,167 |  |  | $ | 3 |  |  | $ | 431 |  |  | $ | 33,594 |
Charge-offs |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (6 | ) |  |  | - |  |  |  | (6 | )
Recoveries |  | 56 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | 61 |
Provision for loan losses |  | 933 |  |  |  | 7 |  |  |  | (22 | ) |  |  | 48 |  |  |  | 1 |  |  |  | 133 |  |  |  | 1,100 |
Balance at September 30, 2018 | $ | 9,949 |  |  | $ | 18,228 |  |  | $ | 4,790 |  |  | $ | 1,215 |  |  | $ | 3 |  |  | $ | 564 |  |  | $ | 34,749 |
27 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued)
| Nine Months Ended September 30, 2019
| Commercial |  | Commercial real estate |  | Commercial construction |  | Residential real estate |  | Consumer |  | Unallocated |  | Total
| (dollars in thousands)
Balance at December 31, 2018 | $ | 9,875 |  |  | $ | 18,847 |  |  | $ | 4,519 |  |  | $ | 1,266 |  |  | $ | 2 |  |  | $ | 445 |  |  | $ | 34,954 |
Charge-offs |  | - |  |  |  | (3,469 | ) |  |  | - |  |  |  | (557 | ) |  |  | (20 | ) |  |  | - |  |  |  | (4,046 | )
Recoveries |  | 214 |  |  |  | 30 |  |  |  | - |  |  |  | 3 |  |  |  | 16 |  |  |  | - |  |  |  | 263 |
Provision |  | (1,764) |  |  |  | 5,602 |  |  |  | 2,656 |  |  |  | 1,049 |  |  |  | 6 |  |  |  | 51 |  |  |  | 7,600 |
Balance at September 30, 2019 | $ | 8,325 |  |  | $ | 21,010 |  |  | $ | 7,175 |  |  | $ | 1,761 |  |  | $ | 4 |  |  | $ | 496 |  |  | $ | 38,771 |
| Nine Months Ended September 30, 2018
| Commercial |  | Commercial real estate |  | Commercial construction |  | Residential real estate |  | Consumer |  | Unallocated |  | Total
| (dollars in thousands)
Balance at December 31, 2017 | $ | 8,233 |  |  | $ | 17,112 |  |  | $ | 4,747 |  |  | $ | 1,050 |  |  | $ | 1 |  |  | $ | 605 |  |  | $ | 31,748 |
Charge-offs |  | (17,066 | ) |  |  | - |  |  |  | - |  |  |  | (18 | ) |  |  | (7 | ) |  |  | - |  |  |  | (17,091 | )
Recoveries |  | 87 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | 92 |
Provision |  | 18,695 |  |  |  | 1,116 |  |  |  | 43 |  |  |  | 183 |  |  |  | 4 |  |  |  | (41 | ) |  |  | 20,000 |
Balance at September 30, 2018 | $ | 9,949 |  |  | $ | 18,228 |  |  | $ | 4,790 |  |  | $ | 1,215 |  |  | $ | 3 |  |  | $ | 564 |  |  | $ | 34,749 |
28 CONNECTONE BANCORP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 6. Loans and the Allowance for Loan Losses – (continued) Troubled Debt Restructurings Loans are considered to have been modified in a troubled debt restructuring (“TDRs”) when due to a borrower’s financial difficulties, the Company makes certain concessions to the borrower that it would not otherwise consider. Modifications may include interest rate reductions, principal or interest forgiveness, longer amortization of principal payments, maturity extension, forbearance, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral. Generally, a nonaccrual loan that has been modified in a troubled debt restructuring remains on nonaccrual status for a period of six months to demonstrate that the borrower is able to meet the terms of the modified loan. At September 30, 2019, there were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status or were contractually past due 90 days or greater and still accruing interest, or whose terms have been modified in troubled debt restructurings. As of September 30, 2019, TDRs totaled $51.5 million, of which $31.8 million were on nonaccrual status and $19.7 million were performing under their restructured terms. As of December 31, 2018, TDRs totaled $34.5 million, of which $23.3 million were on nonaccrual status and $11.2 million were performing under their restructured terms. The Company has allocated $1.4 million and $0.1 million of specific allowance as of September 30, 2019 and September 30, 2018, respectively. There were no charge-offs in connection with a loan modification at the time of modification during the three and nine months ended September 30, 2019. There were no TDRs for which there was a payment default within twelve months following the modification during the three and nine months ended September 30, 2019. The following table presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2019:
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
Troubled debt restructurings: | (dollars in thousands)
Commercial | 8 |  | $ | 13,753 |  | $ | 13,753
Commercial real estate | 2 |  |  | 2,635 |  |  | 2,635
Commercial construction | 3 |  |  | 5,630 |  |  | 5,630
Total | 13 |  | $ | 22,018 |  | $ | 22,018
These 13 loan modifications included were maturity extensions. The following table presents loans by class modified as TDRs that occurred during the nine months ended September 30, 2018:
| Number of Loans |  | Pre-Modification Outstanding Recorded Investment |  | Post-Modification Outstanding Recorded Investment
TDRs | (dollars in thousands)
Commercial | 31 |  | $ | 15,737 |  | $ | 15,737
Commercial real estate | 2 |  |  | 209 |  |  | 209
Commercial construction | 2 |  |  | 1,839 |  |  | 1,839
Residential real estate | 2 |  |  | 454 |  |  | 454
Total | 37 |  | $ | 18,239 |  | $ | 18,239
Included in the commercial loan segment of the troubled debt restructurings are 27 taxi medallion loans totaling $11.2 million. All 27 taxi medallion loans included above were on nonaccrual status prior to modification, and remain on nonaccrual status post-modification. All loan modifications during the nine months ended September 30, 2018 included interest rate reductions and maturity extensions.

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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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