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Loans Receivable, Net | 3 Months Ended
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Mar. 31, 2020
Receivables [Abstract] |
Loans Receivable, Net | Loans Receivable, Net Loans receivable, net at March 31, 2020 and December 31, 2019 consisted of the following (in thousands):
| March 31, 2020 |  | December 31, 2019
Commercial: |  |  |
Commercial and industrial | $ | 502,760 |  |  | $ | 396,434 |
Commercial real estate – owner occupied | 1,220,983 |  |  | 792,653 |
Commercial real estate – investor | 3,331,662 |  |  | 2,296,410 |
Total commercial | 5,055,405 |  |  | 3,485,497 |
Consumer: |  |  |
Residential real estate | 2,458,641 |  |  | 2,321,157 |
Home equity loans and lines | 335,624 |  |  | 318,576 |
Other consumer | 82,920 |  |  | 89,422 |
Total consumer | 2,877,185 |  |  | 2,729,155 |
Total loans | 7,932,590 |  |  | 6,214,652 |
Deferred origination costs, net | 10,586 |  |  | 9,880 |
Allowance for credit losses | (29,635 | ) |  | (16,852 | )
Total loans, net | $ | 7,913,541 |  |  | $ | 6,207,680 |
The Company categorizes all loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation and current economic trends, among other factors. The Company uses the following definitions for risk ratings: Pass: Loans classified as Pass are well protected by the paying capacity and net worth of the borrower. Special Mention: Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date. Substandard: Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful: Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The following table summarizes total loans by year of origination and internally assigned credit grades and risk characteristics (in thousands):
|  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | 2016 |  | 2015 and prior |  | Revolving lines of credit |  | Total
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 7,718 |  |  | $ | 61,109 |  |  | $ | 60,217 |  |  | $ | 47,452 |  |  | $ | 47,051 |  |  | $ | 111,383 |  |  | $ | 147,529 |  |  | $ | 482,459 |
Special Mention |  | — |  |  | — |  |  | 112 |  |  | 832 |  |  | 712 |  |  | 54 |  |  | 800 |  |  | 2,510 |
Substandard |  | 400 |  |  | — |  |  | 3,912 |  |  | 1,497 |  |  | 72 |  |  | 7,877 |  |  | 4,033 |  |  | 17,791 |
Total commercial and industrial |  | 8,118 |  |  | 61,109 |  |  | 64,241 |  |  | 49,781 |  |  | 47,835 |  |  | 119,314 |  |  | 152,362 |  |  | 502,760 |
Commercial real estate - owner occupied |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 59,276 |  |  | 154,245 |  |  | 138,376 |  |  | 143,086 |  |  | 136,276 |  |  | 531,105 |  |  | 22,560 |  |  | 1,184,924 |
Special Mention |  | — |  |  | 191 |  |  | — |  |  | 1,399 |  |  | 1,396 |  |  | 1,439 |  |  | 306 |  |  | 4,731 |
Substandard |  | — |  |  | 2,138 |  |  | 410 |  |  | 2,431 |  |  | 2,391 |  |  | 23,958 |  |  | — |  |  | 31,328 |
Total commercial real estate - owner occupied |  | 59,276 |  |  | 156,574 |  |  | 138,786 |  |  | 146,916 |  |  | 140,063 |  |  | 556,502 |  |  | 22,866 |  |  | 1,220,983 |
Commercial real estate - investor |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 200,651 |  |  | 662,802 |  |  | 410,180 |  |  | 511,079 |  |  | 345,525 |  |  | 983,984 |  |  | 144,341 |  |  | 3,258,562 |
Special Mention |  | — |  |  | 29 |  |  | — |  |  | 3,031 |  |  | 5,950 |  |  | 19,709 |  |  | 8,768 |  |  | 37,487 |
Substandard |  | — |  |  | 178 |  |  | 664 |  |  | — |  |  | 5,069 |  |  | 25,691 |  |  | 4,011 |  |  | 35,613 |
Total commercial real estate - investor |  | 200,651 |  |  | 663,009 |  |  | 410,844 |  |  | 514,110 |  |  | 356,544 |  |  | 1,029,384 |  |  | 157,120 |  |  | 3,331,662 |
Residential real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 138,889 |  |  | 588,723 |  |  | 347,761 |  |  | 220,624 |  |  | 182,541 |  |  | 976,664 |  |  | — |  |  | 2,455,202 |
Special Mention |  | — |  |  | — |  |  | — |  |  | 221 |  |  | 144 |  |  | 3,074 |  |  | — |  |  | 3,439 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total residential real estate |  | 138,889 |  |  | 588,723 |  |  | 347,761 |  |  | 220,845 |  |  | 182,685 |  |  | 979,738 |  |  | — |  |  | 2,458,641 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 6,665 |  |  | 37,024 |  |  | 119,311 |  |  | 34,358 |  |  | 21,322 |  |  | 194,187 |  |  | 2,514 |  |  | 415,381 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 530 |  |  | — |  |  | 530 |
Substandard |  | — |  |  | — |  |  | 35 |  |  | — |  |  | — |  |  | 2,598 |  |  | — |  |  | 2,633 |
Total consumer |  | 6,665 |  |  | 37,024 |  |  | 119,346 |  |  | 34,358 |  |  | 21,322 |  |  | 197,315 |  |  | 2,514 |  |  | 418,544 |
Total loans |  | $ | 413,599 |  |  | $ | 1,506,439 |  |  | $ | 1,080,978 |  |  | $ | 966,010 |  |  | $ | 748,449 |  |  | $ | 2,882,253 |  |  | $ | 334,862 |  |  | $ | 7,932,590 |
An analysis of the allowance for credit losses on loans for the three months ended March 31, 2020 and 2019 is as follows (in thousands):
|  | Commercial and Industrial |  | Commercial Real Estate – Owner Occupied |  | Commercial Real Estate – Investor |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
For the three months ended March 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses on loans |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 1,458 |  |  | $ | 2,893 |  |  | $ | 9,883 |  |  | $ | 2,002 |  |  | $ | 591 |  |  | $ | 25 |  |  | $ | 16,852 |
Impact of CECL adoption |  | 2,416 |  |  | (1,109 | ) |  | (5,395 | ) |  | 3,833 |  |  | 2,981 |  |  | (25 | ) |  | 2,701 |
Credit loss expense |  | 1,529 |  |  | 1,286 |  |  | 2,377 |  |  | 3,585 |  |  | (180 | ) |  | — |  |  | 8,597 |
Initial allowance for credit losses on PCD loans |  | 1,221 |  |  | 26 |  |  | 260 |  |  | 109 |  |  | 1,023 |  |  |  |  | 2,639 |
Charge-offs |  | — |  |  | — |  |  | — |  |  | (1,275 | ) |  | (109 | ) |  | — |  |  | (1,384 | )
Recoveries |  | 25 |  |  | — |  |  | 34 |  |  | 163 |  |  | 8 |  |  | — |  |  | 230 |
Balance at end of period |  | $ | 6,649 |  |  | $ | 3,096 |  |  | $ | 7,159 |  |  | $ | 8,417 |  |  | $ | 4,314 |  |  | $ | — |  |  | $ | 29,635 |
For the three months ended March 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses on loans |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 1,609 |  |  | $ | 2,277 |  |  | $ | 8,770 |  |  | $ | 2,413 |  |  | $ | 486 |  |  | $ | 1,022 |  |  | $ | 16,577 |
Credit loss (benefit) expense |  | (19 | ) |  | 1,550 |  |  | (802 | ) |  | (23 | ) |  | (110 | ) |  | 24 |  |  | 620 |
Charge-offs |  | — |  |  | (389 | ) |  | (21 | ) |  | (427 | ) |  | (31 | ) |  | — |  |  | (868 | )
Recoveries |  | 57 |  |  | — |  |  | 295 |  |  | 2 |  |  | 22 |  |  | — |  |  | 376 |
Balance at end of period |  | $ | 1,647 |  |  | $ | 3,438 |  |  | $ | 8,242 |  |  | $ | 1,965 |  |  | $ | 367 |  |  | $ | 1,046 |  |  | $ | 16,705 |
A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At March 31, 2020, the Company had collateral dependent loans with an amortized cost balance as follows: commercial and industrial of $782,000, commercial real estate - owner occupied of $4.2 million, and commercial real estate - investor of $7.6 million. In addition, the Company had residential and consumer loans collateralized by residential real estate, which are in the process of foreclosure, with an amortized cost balance of $3.3 million at March 31, 2020. The amount of foreclosed residential real estate property held by the Company was $334,000 at March 31, 2020. In accordance with ASC 310, prior to the adoption of ASU 2016-13, the following table presents the balance in the allowance for credit losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2019, excluding PCD loans (in thousands):
| Commercial and Industrial |  | Commercial Real Estate – Owner Occupied |  | Commercial Real Estate – Investor |  | Residential Real Estate |  | Consumer |  | Unallocated |  | Total
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |
Ending allowance balance attributed to loans: |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | — |  |  | $ | 474 |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | 476 |
Collectively evaluated for impairment | 1,458 |  |  | 2,419 |  |  | 9,883 |  |  | 2,002 |  |  | 589 |  |  | 25 |  |  | 16,376 |
Total ending allowance balance | $ | 1,458 |  |  | $ | 2,893 |  |  | $ | 9,883 |  |  | $ | 2,002 |  |  | $ | 591 |  |  | $ | 25 |  |  | $ | 16,852 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |
Loans individually evaluated for impairment | $ | 243 |  |  | $ | 6,163 |  |  | $ | 5,584 |  |  | $ | 11,009 |  |  | $ | 3,511 |  |  | $ | — |  |  | $ | 26,510 |
Loans collectively evaluated for impairment | 395,848 |  |  | 785,778 |  |  | 2,279,114 |  |  | 2,309,812 |  |  | 404,325 |  |  | — |  |  | 6,174,877 |
Total ending loan balance | $ | 396,091 |  |  | $ | 791,941 |  |  | $ | 2,284,698 |  |  | $ | 2,320,821 |  |  | $ | 407,836 |  |  | $ | — |  |  | $ | 6,201,387 |
As of December 31, 2019, the Company defined an impaired loan as non-accrual commercial real estate, multi-family, land, construction and commercial loans in excess of $250,000. Impaired loans also include all loans modified as troubled debt restructurings. At December 31, 2019, the impaired loan portfolio totaled $26.5 million for which there was $476,000 specific allocation in the allowance for credit losses. The average balance of impaired loans for the three months ended March 31, 2019 were $32.1 million. In accordance with ASC 310, prior to the adoption of ASU 2016-13, the summary of loans individually evaluated for impairment by loan portfolio segment as of December 31, 2019 and for the three months ended March 31, 2019, is as follows, excluding PCI loans (in thousands):
| Unpaid Principal Balance |  | Recorded Investment |  | Allowance for Credit Losses Allocated
As of December 31, 2019 |  |  |  |  |
With no related allowance recorded: |  |  |  |  |
Commercial and industrial | $ | 265 |  |  | $ | 243 |  |  | $ | — |
Commercial real estate – owner occupied | 4,062 |  |  | 3,968 |  |  | — |
Commercial real estate – investor | 6,665 |  |  | 5,584 |  |  | — |
Residential real estate | 11,009 |  |  | 11,009 |  |  | — |
Consumer | 3,734 |  |  | 3,509 |  |  | — |
| $ | 25,735 |  |  | $ | 24,313 |  |  | $ | — |
With an allowance recorded: |  |  |  |  |
Commercial and industrial | $ | — |  |  | $ | — |  |  | $ | — |
Commercial real estate – owner occupied | 2,376 |  |  | 2,195 |  |  | 474 |
Commercial real estate – investor | — |  |  | — |  |  | — |
Residential real estate | — |  |  | — |  |  | — |
Consumer | 2 |  |  | 2 |  |  | 2 |
| $ | 2,378 |  |  | $ | 2,197 |  |  | $ | 476 |
| Three Months Ended March 31, 2019
| Average Recorded Investment |  | Interest Income Recognized
With no related allowance recorded: |  |  |
Commercial and industrial | $ | 938 |  |  | $ | 3 |
Commercial real estate – owner occupied | 4,153 |  |  | 42 |
Commercial real estate – investor | 11,667 |  |  | 136 |
Residential real estate | 10,046 |  |  | 131 |
Consumer | 3,071 |  |  | 46 |
| $ | 29,875 |  |  | $ | 358 |
With an allowance recorded: |  |  |
Commercial and industrial | $ | — |  |  | $ | — |
Commercial real estate – owner occupied | 2,250 |  |  | 36 |
Commercial real estate – investor | — |  |  | — |
Residential real estate | — |  |  | — |
Consumer | — |  |  | — |
| $ | 2,250 |  |  | $ | 36 |
The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of March 31, 2020 and December 31, 2019 (in thousands). The March 31, 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).
| March 31, 2020 |  | December 31, 2019
Commercial and industrial | $ | 782 |  |  | $ | 207 |
Commercial real estate – owner occupied | 4,219 |  |  | 4,811 |
Commercial real estate – investor | 9,123 |  |  | 2,917 |
Residential real estate | 6,690 |  |  | 7,181 |
Consumer | 3,075 |  |  | 2,733 |
| $ | 23,889 |  |  | $ | 17,849 |
At March 31, 2020, there were no commitments to lend additional funds to borrowers whose loans are in non-accrual status. At March 31, 2020 and December 31, 2019, loans in the amount of $23.9 million and $17.8 million, respectively, were three or more months delinquent or in the process of foreclosure. At March 31, 2020, the non-accrual loans were included in the allowance for credit loss calculation and the Company did not recognize or accrue interest income on these loans. At March 31, 2020 and December 31, 2019, there were no loans that were ninety days or greater past due and still accruing interest. The following table presents the aging of the recorded investment in past due loans as of March 31, 2020 and December 31, 2019 by loan portfolio segment (in thousands). The March 31, 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).
| 30-59 Days Past Due |  | 60-89 Days Past Due |  | Greater than 90 Days Past Due |  | Total Past Due |  | Loans Not Past Due |  | Total
March 31, 2020 |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 3,052 |  |  | $ | 575 |  |  | $ | 207 |  |  | $ | 3,834 |  |  | $ | 498,926 |  |  | $ | 502,760 |
Commercial real estate – owner occupied | 8,883 |  |  | 1,307 |  |  | 392 |  |  | 10,582 |  |  | 1,210,401 |  |  | 1,220,983 |
Commercial real estate – investor | 19,152 |  |  | 2,595 |  |  | 7,466 |  |  | 29,213 |  |  | 3,302,449 |  |  | 3,331,662 |
Residential real estate | 18,363 |  |  | 206 |  |  | 3,234 |  |  | 21,803 |  |  | 2,436,838 |  |  | 2,458,641 |
Consumer | 1,825 |  |  | 530 |  |  | 2,633 |  |  | 4,988 |  |  | 413,556 |  |  | 418,544 |
| $ | 51,275 |  |  | $ | 5,213 |  |  | $ | 13,932 |  |  | $ | 70,420 |  |  | $ | 7,862,170 |  |  | $ | 7,932,590 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial | $ | 100 |  |  | $ | — |  |  | $ | 207 |  |  | $ | 307 |  |  | $ | 395,784 |  |  | $ | 396,091 |
Commercial real estate – owner occupied | 1,541 |  |  | 1,203 |  |  | 1,040 |  |  | 3,784 |  |  | 788,157 |  |  | 791,941 |
Commercial real estate – investor | 381 |  |  | 938 |  |  | 2,792 |  |  | 4,111 |  |  | 2,280,587 |  |  | 2,284,698 |
Residential real estate | 8,161 |  |  | 3,487 |  |  | 2,859 |  |  | 14,507 |  |  | 2,306,314 |  |  | 2,320,821 |
Consumer | 1,048 |  |  | 491 |  |  | 2,388 |  |  | 3,927 |  |  | 403,909 |  |  | 407,836 |
| $ | 11,231 |  |  | $ | 6,119 |  |  | $ | 9,286 |  |  | $ | 26,636 |  |  | $ | 6,174,751 |  |  | $ | 6,201,387 |
The Company classifies certain loans as troubled debt restructurings when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term, the capitalization of past due amounts and/or the restructuring of scheduled principal payments. One-to-four family and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered troubled debt restructurings. For these loans, the Bank retains its security interest in the real estate collateral. At March 31, 2020 and December 31, 2019, troubled debt restructured (“TDR”) loans totaled $22.4 million and $24.6 million, respectively. Included in the non-accrual loan total at March 31, 2020, and December 31, 2019, were $6.2 million and $6.6 million, respectively, of troubled debt restructurings. At March 31, 2020, and December 31, 2019, the Company had $424,000 and $476,000, respectively, of specific reserves allocated to loans that are classified as troubled debt restructurings. Non-accrual loans which become troubled debt restructurings are generally returned to accrual status after six months of performance. In addition to the troubled debt restructurings included in non-accrual loans, the Company also has loans classified as accruing troubled debt restructurings at March 31, 2020 and December 31, 2019, which totaled $16.1 million and $18.0 million, respectively. The following table presents information about troubled debt restructurings which occurred during the three months ended March 31, 2020 and 2019, and troubled debt restructurings modified within the previous year and which defaulted during the three months ended March 31, 2020 and 2019 (dollars in thousands):
| Number of Loans |  | Pre-modification Recorded Investment |  | Post-modification Recorded Investment
Three months ended March 31, 2020 |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |
Consumer | 4 |  |  | $ | 159 |  |  | $ | 177 |
Residential real estate | 2 |  |  | 226 |  |  | 234 |
| Number of Loans |  | Recorded Investment
Troubled Debt Restructurings |  |  |
Which Subsequently Defaulted: | None |  |  | None |
| Number of Loans |  | Pre-modification Recorded Investment |  | Post-modification Recorded Investment
Three Months Ended March 31, 2019 |  |  |  |  |
Troubled Debt Restructurings: |  |  |  |  |
Residential real estate | 3 |  |  | 589 |  |  | 621 |
| Number of Loans |  | Recorded Investment
Troubled Debt Restructurings |  |  |
Which Subsequently Defaulted | None |  |  | None |
In response to the COVID-19 pandemic and its economic impact to customers, a short-term modification program that complies with the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was implemented to provide temporary payment relief to those borrowers directly impacted by COVID-19. This program allows for a deferral of payments for 90 days, which may extend for an additional 90 days, for a maximum of 180 days on a cumulative and successive basis. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. Under recently issued guidance, provided these loans were current as of either year end or the date of the modification, these loans are not considered TDR loans at March 31, 2020 and will not be reported as past due during the deferral period. As part of the Two River and Country Bank acquisitions, the Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows (in thousands):
|  | Two River January 1, 2020 |  | Country Bank January 1, 2020
Purchase price of loans at acquisition |  | $ | 26,104 |  |  | $ | 24,667 |
Allowance for credit losses at acquisition |  | 1,343 |  |  | 1,296 |
Non-credit discount at acquisition |  | 2,562 |  |  | 5,334 |
Par value of acquired loans at acquisition |  | $ | 30,009 |  |  | $ | 31,297 |
In accordance with ASC 310, prior to the adoption of ASU 2016-13,the following table summarizes the changes in accretable yield for PCI loans during the three months ended March 31, 2019 (in thousands):
| Three Months Ended March 31,
|  | 2019
Beginning balance |  | $ | 3,630 |
Acquisition |  | 1,171 |
Accretion |  | (653 | )
Reclassification from non-accretable difference |  | 45 |
Ending balance |  | $ | 4,193 |

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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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