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Loans Receivable, Net
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Loans Receivable, Net Loans Receivable, Net
Loans receivable, net at September 30, 2020 and December 31, 2019 consisted of the following (in thousands):
September 30, 2020December 31, 2019
Commercial:
Commercial and industrial$599,188 $396,434 
Commercial real estate – owner occupied1,176,529 792,653 
Commercial real estate – investor3,453,276 2,296,410 
Total commercial5,228,993 3,485,497 
Consumer:
Residential real estate2,407,178 2,321,157 
Home equity loans and lines301,712 318,576 
Other consumer63,095 89,422 
Total consumer2,771,985 2,729,155 
Total loans8,000,978 6,214,652 
Deferred origination (fees) costs, net(1,238)9,880 
Allowance for credit losses(56,350)(16,852)
Total loans, net$7,943,390 $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. This includes borrowers that have been negatively affected by the pandemic but demonstrate some degree of liquidity. This liquidity may or may not be adequate to resume operations. 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. This includes borrowers whose operations were negatively affected by the pandemic and whom, in our assessment, do not have adequate liquidity available to resume operations at levels sufficient to service their current debt levels. 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, internally assigned credit grades and risk characteristics (in thousands):
202020192018201720162015 and priorRevolving lines of creditTotal
September 30, 2020
Commercial and industrial
Pass$238,326 $47,785 $32,607 $23,576 $38,353 $70,681 $123,071 $574,399 
Special Mention— 629 759 1,431 892 200 2,597 6,508 
Substandard355 1,092 1,351 1,557 53 3,264 10,609 18,281 
Total commercial and industrial238,681 49,506 34,717 26,564 39,298 74,145 136,277 599,188 
Commercial real estate - owner occupied
Pass78,646 125,479 132,958 136,186 117,713 466,072 10,742 1,067,796 
Special Mention— 1,736 8,263 1,374 5,440 15,477 393 32,683 
Substandard— 33,661 5,924 3,700 5,947 25,975 843 76,050 
Total commercial real estate - owner occupied78,646 160,876 147,145 141,260 129,100 507,524 11,978 1,176,529 
Commercial real estate - investor
Pass479,468 632,528 309,128 437,510 323,544 894,433 209,485 3,286,096 
Special Mention— 7,296 22,274 9,756 9,657 48,393 150 97,526 
Substandard4,311 7,673 2,058 11,251 8,129 32,523 3,709 69,654 
Total commercial real estate - investor483,779 647,497 333,460 458,517 341,330 975,349 213,344 3,453,276 
Residential real estate (1)
Pass464,423 489,832 268,996 185,249 161,255 825,373 — 2,395,128 
Special Mention162 — — 1,112 — 2,891 — 4,165 
Substandard— — 895 368 — 6,622 — 7,885 
Total residential real estate464,585 489,832 269,891 186,729 161,255 834,886 — 2,407,178 
Consumer (1)
Pass18,711 28,994 94,536 28,558 17,947 166,364 5,003 360,113 
Special Mention90 167 — — — 328 — 585 
Substandard— 225 33 — 69 3,782 — 4,109 
Total consumer18,801 29,386 94,569 28,558 18,016 170,474 5,003 364,807 
Total loans$1,284,492 $1,377,097 $879,782 $841,628 $688,999 $2,562,378 $366,602 $8,000,978 
(1)For residential and consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity.
An analysis of the allowance for credit losses on loans for the three and nine months ended September 30, 2020 and September 30, 2019 is as follows (in thousands):
 Commercial
and 
Industrial		Commercial
Real Estate –
Owner
Occupied		Commercial
Real Estate –
Investor		Residential
Real Estate		ConsumerUnallocatedTotal
For the three months ended
September 30, 2020
Allowance for credit losses on loans
Balance at beginning of period$4,979 $2,765 $8,860 $17,685 $4,220 $— $38,509 
Credit loss (benefit) expense(106)5,166 30,131 (1,891)(464)— 32,836 
Charge-offs(575)(2,252)(12,037)(6)(541)— (15,411)
Recoveries29 2 32 320 33 — 416 
Balance at end of period$4,327 $5,681 $26,986 $16,108 $3,248 $— $56,350 
For the three months ended
September 30, 2019
Allowance for credit losses on loans
Balance at beginning of period$1,639 $2,868 $8,406 $1,966 $512 $744 $16,135 
Credit loss (benefit) expense(352)80 711 193 10 (337)305 
Charge-offs— (142)(57)(27)(127)— (353)
Recoveries49 114 292 39 55 — 549 
Balance at end of period$1,336 $2,920 $9,352 $2,171 $450 $407 $16,636 
For the nine months ended
September 30, 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 adoption2,416 (1,109)(5,395)3,833 2,981 (25)2,701 
Credit loss (benefit) expense(275)6,120 34,208 10,749 (727)— 50,075 
Initial allowance for credit losses on PCD loans1,221 26 260 109 1,023 — 2,639 
Charge-offs(575)(2,253)(12,062)(1,351)(723)— (16,964)
Recoveries82 4 92 766 103 — 1,047 
Balance at end of period$4,327 $5,681 $26,986 $16,108 $3,248 $— $56,350 
For the nine months ended
September 30, 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(406)1,192 26 899 185 (615)1,281 
Charge-offs— (663)(143)(1,221)(332)— (2,359)
Recoveries133 114 699 80 111 — 1,137 
Balance at end of period$1,336 $2,920 $9,352 $2,171 $450 $407 $16,636 
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 September 30, 2020, the Company had collateral dependent loans with an amortized cost balance as follows: commercial and industrial of $3.3 million, commercial real estate - owner occupied of $12.4 million, and commercial real estate - investor of $10.3 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 $1.7 million at September 30, 2020. The amount of foreclosed residential real estate property held by the Company was $106,000 at September 30, 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		ConsumerUnallocatedTotal
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 and nine months ended September 30, 2019 were $31.5 million and $30.9 million, respectively.
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 and nine months ended September 30, 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 occupied4,062 3,968 — 
Commercial real estate – investor6,665 5,584 — 
Residential real estate11,009 11,009 — 
Consumer3,734 3,509 — 
$25,735 $24,313 $— 
With an allowance recorded:
Commercial and industrial$— $— $— 
Commercial real estate – owner occupied2,376 2,195 474 
Commercial real estate – investor— — — 
Residential real estate— — — 
Consumer2 2 2 
$2,378 $2,197 $476 
 Three Months Ended September 30, 2019Nine months ended September 30, 2019
 Average
Recorded
Investment		Interest
Income
Recognized		Average
Recorded
Investment		Interest
Income
Recognized
With no related allowance recorded:
Commercial and industrial$249 $1 $708 $4 
Commercial real estate – owner occupied3,808 80 4,337 122 
Commercial real estate – investor10,882 22 10,501 158 
Residential real estate10,104 140 10,090 271 
Consumer3,270 48 3,171 94 
$28,313 $291 $28,807 $649 
With an allowance recorded:
Commercial and industrial$— $— $— $— 
Commercial real estate – owner occupied3,197 — — — 
Commercial real estate – investor— — 2,131 36 
Residential real estate— — — — 
Consumer— — — — 
$3,197 $— $2,131 $36 

The following table presents the recorded investment in non-accrual loans held-for-investment by loan portfolio segment as of September 30, 2020 and December 31, 2019 (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, 2020December 31, 2019
Commercial and industrial$3,263 $207 
Commercial real estate – owner occupied12,376 4,811 
Commercial real estate – investor10,259 2,917 
Residential real estate12,620 7,181 
Consumer3,524 2,733 
$42,042 $17,849 
 
At September 30, 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 September 30, 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 September 30, 2020 and December 31, 2019 by loan portfolio segment (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).
30-59
Days
Past Due		60-89
Days
Past Due		Greater
than
90 Days
Past Due		Total
Past Due		Loans Not
Past Due		Total
September 30, 2020
Commercial and industrial$680 $123 $1,663 $2,466 $596,722 $599,188 
Commercial real estate – owner occupied68 78 8,302 8,448 1,168,081 1,176,529 
Commercial real estate – investor212 7,248 4,969 12,429 3,440,847 3,453,276 
Residential real estate612 4,165 7,885 12,662 2,394,516 2,407,178 
Consumer747 585 4,109 5,441 359,366 364,807 
$2,319 $12,199 $26,928 $41,446 $7,959,532 $8,000,978 
December 31, 2019
Commercial and industrial$100 $— $207 $307 $395,784 $396,091 
Commercial real estate – owner occupied1,541 1,203 1,040 3,784 788,157 791,941 
Commercial real estate – investor381 938 2,792 4,111 2,280,587 2,284,698 
Residential real estate8,161 3,487 2,859 14,507 2,306,314 2,320,821 
Consumer1,048 491 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 September 30, 2020 and December 31, 2019, troubled debt restructured (“TDR”) loans totaled $22.6 million and $24.6 million, respectively. Included in the non-accrual loan total at September 30, 2020, and December 31, 2019, were $9.9 million and $6.6 million, respectively, of troubled debt restructurings. At September 30, 2020, and December 31, 2019, the Company had $448,000 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 September 30, 2020 and December 31, 2019, which totaled $12.8 million and $18.0 million, respectively. 
 
The following table presents information about troubled debt restructurings which occurred during the three and nine months ended September 30, 2020 and September 30, 2019, and troubled debt restructurings modified within the previous year and which defaulted during the three and nine months ended September 30, 2020 and September 30, 2019 (dollars in thousands):
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Three months ended September 30, 2020
Troubled Debt Restructurings:
Consumer1 $16 $16 
Commercial real estate – investor1 928 993 
Residential real estate1 418 418 
 Number of Loans  Recorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:NoneNone
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Nine months ended September 30, 2020
Troubled Debt Restructurings:
Consumer5 $175 $193 
Commercial real estate – owner occupied1 1,112 1,143 
Commercial real estate – investor1 928 993 
Residential real estate5 849 865 
 Number of Loans  Recorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:NoneNone
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Three Months Ended September 30, 2019
Troubled Debt Restructurings:
Consumer1 $54 $54 
 Number of Loans  Recorded Investment
Troubled Debt Restructurings
Which Subsequently DefaultedNoneNone
Number of LoansPre-modification
Recorded Investment		Post-modification
Recorded Investment
Nine months ended September 30, 2019
Troubled Debt Restructurings:
Consumer5 $496 $516 
Residential real estate5 921 972 
 Number of Loans  Recorded Investment
Troubled Debt Restructurings  
Which Subsequently Defaulted:NoneNone
In response to the COVID-19 pandemic and its economic impact on customers, short-term modification programs that comply with the CARES Act were implemented to provide temporary payment relief to those borrowers directly impacted by COVID-19. The Commercial Borrower Relief Program allowed for the deferral of principal and interest or principal only. For principal and interest deferrals as well as principal only deferrals, all payments received will first be applied to all accrued and unpaid interest and the balance, if any, on account of unpaid principal, then to fees, expenses and other amounts due to the Bank. Monthly payments shall continue until the maturity date when all then unpaid principal, interest, fees, and all other charges are due and payable to the Bank. The Consumer Borrower Relief Program allowed for the deferral of principal and interest. The deferred payments along with interest accrued during the deferral period are due and payable on the maturity date. Provided these loans were current as of either year end or the date of the modification, these loans are not considered TDR loans at September 30, 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$26,354 $24,667 
Allowance for credit losses at acquisition1,343 1,296 
Non-credit discount at acquisition3,589 5,334 
Par value of acquired loans at acquisition$31,286 $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 and nine months ended September 30, 2019 (in thousands):
Three Months Ended
September 30,		Nine Months Ended
September 30,
20192019
Beginning balance$3,183 $3,630 
Acquisition— 691 
Accretion(599)(1,783)
Reclassification from non-accretable difference69 115 
Ending balance$2,653 $2,653