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Loans Receivable, Net
 3 Months Ended
Mar. 31, 2017
Receivables [Abstract]  
Loans Receivable, Net
Note 5. Loans Receivable, Net
Loans receivable, net at March 31, 2017 and December 31, 2016 consisted of the following (in thousands):
 
March 31, 2017
 
December 31, 2016
Commercial:
 
 
 
Commercial and industrial
$
205,590

 
$
152,569

Commercial real estate – owner occupied
531,325

 
534,214

Commercial real estate – investor
1,111,989

 
1,132,075

Total commercial
1,848,904

 
1,818,858

Consumer:
 
 
 
Residential mortgage
1,636,497

 
1,647,154

Residential construction
76,985

 
65,319

Home equity loans and lines
285,149

 
288,991

Other consumer
1,388

 
1,564

Total consumer
2,000,019

 
2,003,028

 
3,848,923

 
3,821,886

Purchased credit impaired (“PCI”) loans
7,118

 
7,575

Total Loans
3,856,041

 
3,829,461

Loans in process
(17,976
)
 
(14,249
)
Deferred origination costs, net
3,686

 
3,414

Allowance for loan losses
(16,151
)
 
(15,183
)
Total loans, net
$
3,825,600

 
$
3,803,443


 
At March 31, 2017 and December 31, 2016, loans in the amount of $21.7 million and $13.6 million, respectively, were three or more months delinquent or in the process of foreclosure and the Company was not accruing interest income on these loans. There were no loans ninety days or greater past due and still accruing interest. Non-accrual loans include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.
The recorded investment in mortgage and consumer loans collateralized by residential real estate which are in the process of foreclosure amounted to $4.3 million at March 31, 2017. The amount of foreclosed residential real estate property held by the Company was $1.1 million at March 31, 2017.
The Company defines an impaired loan as all 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 March 31, 2017, the impaired loan portfolio totaled $35.3 million for which there was a specific allocation in the allowance for loan losses of $976,000. At December 31, 2016, the impaired loan portfolio totaled $31.0 million for which there was a specific allocation in the allowance for loan losses of $510,000. The average balance of impaired loans for the three months ended March 31, 2017 and 2016 was $33.2 million and $34.6 million, respectively.
An analysis of the allowance for loan losses for the three months ended March 31, 2017 and 2016 is as follows (in thousands):
 
Three Months Ended
March 31,
 
2017
 
2016
Balance at beginning of period
$
15,183

 
$
16,722

Provision charged to operations
700

 
563

Charge-offs
(205
)
 
(1,172
)
Recoveries
473

 
101

Balance at end of period
$
16,151

 
$
16,214



The following table presents an analysis of the allowance for loan losses for the three months ended March 31, 2017 and 2016 and the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2017 and December 31, 2016, excluding PCI loans (in thousands):

 
Residential
Real Estate
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 
Consumer
 
Commercial
and Industrial
 
Unallocated
 
Total
For the three months ended March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
2,245

 
$
2,999

 
$
6,361

 
$
1,110

 
$
2,037

 
$
431

 
$
15,183

Provision (benefit) charged to operations
(627
)
 
390

 
993

 
20

 
(201
)
 
125

 
700

Charge-offs
(49
)
 
(50
)
 
—

 
(18
)
 
(88
)
 
—

 
(205
)
Recoveries
—

 
110

 
7

 
24

 
332

 
—

 
473

Balance at end of period
$
1,569

 
$
3,449

 
$
7,361

 
$
1,136

 
$
2,080

 
$
556

 
$
16,151

For the three months ended March 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
6,590

 
$
2,292

 
$
4,873

 
$
1,095

 
$
1,639

 
$
233

 
$
16,722

Provision (benefit) charged to operations
(11
)
 
1,039

 
(581
)
 
(40
)
 
(144
)
 
300

 
563

Charge-offs
(78
)
 
(968
)
 
—

 
(3
)
 
(123
)
 
—

 
(1,172
)
Recoveries
54

 
—

 
10

 
29

 
8

 
—

 
101

Balance at end of period
$
6,555

 
$
2,363

 
$
4,302

 
$
1,081

 
$
1,380

 
$
533

 
$
16,214

March 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
285

 
$
—

 
$
606

 
$
85

 
$
—

 
$
—

 
$
976

Collectively evaluated for impairment
1,284

 
3,449

 
6,755

 
1,051

 
2,080

 
556

 
15,175

Total ending allowance balance
$
1,569

 
$
3,449

 
$
7,361

 
$
1,136

 
$
2,080

 
$
556

 
$
16,151

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
13,072

 
$
10,763

 
$
8,718

 
$
2,522

 
$
268

 
$
—

 
$
35,343

Loans collectively evaluated for impairment
1,700,410

 
520,562

 
1,103,271

 
284,015

 
205,322

 
—

 
3,813,580

Total ending loan balance
$
1,713,482

 
$
531,325

 
$
1,111,989

 
$
286,537

 
$
205,590

 
$
—

 
$
3,848,923

December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
266

 
$
—

 
$
119

 
$
125

 
$
—

 
$
—

 
$
510

Collectively evaluated for impairment
1,979

 
2,999

 
6,242

 
985

 
2,037

 
431

 
14,673

Total ending allowance balance
$
2,245

 
$
2,999

 
$
6,361

 
$
1,110

 
$
2,037

 
$
431

 
$
15,183

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
13,306

 
$
11,123

 
$
3,789

 
$
2,556

 
$
268

 
$
—

 
$
31,042

Loans collectively evaluated for impairment
1,699,167

 
523,091

 
1,128,286

 
287,999

 
152,301

 
—

 
3,790,844

Total ending loan balance
$
1,712,473

 
$
534,214

 
$
1,132,075

 
$
290,555

 
$
152,569

 
$
—

 
$
3,821,886


A summary of impaired loans at March 31, 2017, and December 31, 2016, is as follows, excluding PCI loans (in thousands):
 
 
March 31, 2017
 
December 31, 2016
Impaired loans with no allocated allowance for loan losses
$
24,811

 
$
25,228

Impaired loans with allocated allowance for loan losses
10,532

 
5,814

 
$
35,343

 
$
31,042

Amount of the allowance for loan losses allocated
$
976

 
$
510


At March 31, 2017, impaired loans included troubled debt restructured (“TDR”) loans of $30.5 million, of which $27.0 million were performing in accordance with their restructured terms for a minimum of six months and were accruing interest. At December 31, 2016, impaired loans included TDR loans of $30.5 million, of which $27.0 million were performing in accordance with their restructured terms for a minimum of six months and were accruing interest.
The summary of loans individually evaluated for impairment by loan portfolio segment as of March 31, 2017, and December 31, 2016 and for the three months ended March 31, 2017 and 2016, is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
As of March 31, 2017
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Residential real estate
$
8,907

 
$
8,760

 
$
—

Commercial real estate – owner occupied
11,550

 
10,763

 
—

Commercial real estate – investor
3,240

 
2,782

 
 
Consumer
2,555

 
2,238

 
—

Commercial and industrial
300

 
268

 
—

 
$
26,552

 
$
24,811

 
$
—

With an allowance recorded:
 
 
 
 
 
Residential real estate
$
4,753

 
$
4,312

 
$
285

Commercial real estate – owner occupied
—

 
—

 
—

Commercial real estate – investor
6,048

 
5,936

 
606

Consumer
515

 
284

 
85

Commercial and industrial
—

 
—

 
—

 
$
11,316

 
$
10,532

 
$
976

As of December 31, 2016
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Residential real estate
$
9,848

 
$
9,694

 
$
—

Commercial real estate – owner occupied
11,886

 
11,123

 
—

Commercial real estate – investor
2,239

 
1,897

 
—

Consumer
2,559

 
2,246

 
—

Commercial and industrial
300

 
268

 
—

 
$
26,832

 
$
25,228

 
$
—

With an allowance recorded:
 
 
 
 
 
Residential real estate
$
3,998

 
$
3,612

 
$
266

Commercial real estate – owner occupied
—

 
—

 
—

Commercial real estate – investor
2,011

 
1,892

 
119

Consumer
581

 
310

 
125

Commercial and industrial
—

 
—

 
—

 
$
6,590

 
$
5,814

 
$
510

 
Three Months Ended March 31,
 
2017
 
2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Residential real estate
$
9,227

 
$
86

 
$
13,190

 
$
125

Commercial real estate – owner occupied
10,943

 
161

 
16,792

 
131

Commercial real estate – investor
2,340

 
26

 
345

 
2

Consumer
2,242

 
28

 
2,196

 
29

Commercial and industrial
268

 
5

 
703

 
—

 
$
25,020

 
$
306

 
$
33,226

 
$
287

With an allowance recorded:
 
 
 
 
 
 
 
Residential real estate
$
3,962

 
$
62

 
$
489

 
$
4

Commercial real estate – owner occupied
—

 
—

 
228

 
4

Commercial real estate – investor
3,914

 
55

 
642

 
—

Consumer
297

 
6

 
—

 
—

Commercial and industrial
—

 
—

 
—

 
—

 
$
8,173

 
$
123

 
$
1,359

 
$
8

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of March 31, 2017 and December 31, 2016, excluding PCI loans (in thousands):
 
March 31, 2017
 
December 31, 2016
Residential real estate
$
11,993

 
$
8,126

Commercial real estate – owner occupied
2,383

 
2,414

Commercial real estate – investor
5,118

 
521

Consumer
1,954

 
2,064

Commercial and industrial
231

 
441

 
$
21,679

 
$
13,566


 
The following table presents the aging of the recorded investment in past due loans as of March 31, 2017 and December 31, 2016 by loan portfolio segment, excluding PCI loans (in thousands):
 
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, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential real estate
$
4,875

 
$
4,099

 
$
8,343

 
$
17,317

 
$
1,696,165

 
$
1,713,482

Commercial real estate – owner occupied
3,224

 
616

 
1,406

 
5,246

 
526,079

 
531,325

Commercial real estate – investor
970

 
2,576

 
4,492

 
8,038

 
1,103,951

 
1,111,989

Consumer
1,351

 
472

 
1,513

 
3,336

 
283,201

 
286,537

Commercial and industrial
1,934

 
169

 
322

 
2,425

 
203,165

 
205,590

 
$
12,354

 
$
7,932

 
$
16,076

 
$
36,362

 
$
3,812,561

 
$
3,848,923

December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Residential real estate
$
9,532

 
$
3,038

 
$
7,159

 
$
19,729

 
$
1,692,744

 
$
1,712,473

Commercial real estate – owner occupied
3,962

 
1,032

 
890

 
5,884

 
528,330

 
534,214

Commercial real estate – investor
—

 
—

 
521

 
521

 
1,131,554

 
1,132,075

Consumer
1,519

 
436

 
1,963

 
3,918

 
286,637

 
290,555

Commercial and industrial
5,548

 
181

 
384

 
6,113

 
146,456

 
152,569

 
$
20,561

 
$
4,687

 
$
10,917

 
$
36,165

 
$
3,785,721

 
$
3,821,886


The Company categorizes all commercial and commercial real estate loans, except for small business 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.
As of March 31, 2017 and December 31, 2016, and based on the most recent analysis performed, the risk category of loans by loan portfolio segment follows, excluding PCI loans (in thousands): 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
March 31, 2017
 
 
 
 
 
 
 
 
 
Commercial real estate – owner occupied
$
505,907

 
$
8,957

 
$
16,461

 
$
—

 
$
531,325

Commercial real estate – investor
1,082,896

 
5,666

 
23,427

 
—

 
1,111,989

Commercial and industrial
202,581

 
1,684

 
1,214

 
111

 
205,590

 
$
1,791,384

 
$
16,307

 
$
41,102

 
$
111

 
$
1,848,904

December 31, 2016
 
 
 
 
 
 
 
 
 
Commercial real estate – owner occupied
$
501,652

 
$
7,680

 
$
24,882

 
$
—

 
$
534,214

Commercial real estate – investor
1,106,747

 
713

 
24,615

 
—

 
1,132,075

Commercial and industrial
150,474

 
757

 
1,338

 
—

 
152,569

 
$
1,758,873

 
$
9,150

 
$
50,835

 
$
—

 
$
1,818,858


For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of March 31, 2017 and December 31, 2016, excluding PCI loans (in thousands):
 
Residential Real Estate
 
Residential
 
Consumer
March 31, 2017
 
 
 
Performing
$
1,701,489

 
$
284,583

Non-performing
11,993

 
1,954

 
$
1,713,482

 
$
286,537

December 31, 2016
 
 
 
Performing
$
1,704,347

 
$
288,491

Non-performing
8,126

 
2,064

 
$
1,712,473

 
$
290,555


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. Included in the non-accrual loan total at March 31, 2017 and December 31, 2016 were $3.5 million of troubled debt restructurings. At March 31, 2017 and December 31, 2016, the Company has allocated $482,000 and $510,000, respectively, of specific reserves 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, 2017 and December 31, 2016, which totaled $27.0 million in each period. Troubled debt restructurings are considered in the allowance for loan losses similar to other impaired loans.
 
The following table presents information about troubled debt restructurings which occurred during the three months ended March 31, 2017 and 2016, and troubled debt restructurings modified within the previous year and which defaulted during the three months ended March 31, 2017 and 2016, (dollars in thousands):
 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three Months Ended March 31, 2017
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Residential real estate
2

 
$
368

 
$
341

Commercial real estate - owner occupied
2

 
1,643

 
1,643

Commercial real estate - investor
1

 
626

 
773


 
Number of Loans
  
Recorded Investment
Troubled Debt Restructurings
 
  
 
Which Subsequently Defaulted:
1

  
188

 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three Months Ended March 31, 2016
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Residential real estate
1

 
$
190

 
$
189

Commercial real estate – owner occupied
1

 
256

 
270

 
Number of Loans
  
Recorded Investment
Troubled Debt Restructurings
 
  
 
Which Subsequently Defaulted:
None

  
None


 As part of the Cape, Ocean Shore and Colonial American acquisitions, PCI loans were acquired at a discount primarily due to deteriorated credit quality. PCI loans are accounted for at fair value, based upon the present value of expected future cash flows, with no related allowance for loan losses.
 
The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected and the estimated fair value of the PCI loans acquired from Ocean Shore at December 1, 2016, Cape at May 2, 2016, and Colonial American at July 31, 2015 (in thousands):
 
Ocean Shore
December 1, 2016
 
Cape
May 2, 2016
 
Colonial American
July 31, 2015
Contractually required principal and interest
$
7,385

 
$
21,345

 
$
3,263

Contractual cash flows not expected to be collected (non-accretable discount)
(4,666
)
 
(12,387
)
 
(1,854
)
Expected cash flows to be collected at acquisition
2,719

 
8,958

 
1,409

Interest component of expected cash flows (accretable yield)
(401
)
 
(576
)
 
(109
)
Fair value of acquired loans
$
2,318

 
$
8,382

 
$
1,300

The following table summarizes the changes in accretable yield for PCI loans during the three months ended March 31, 2017 and 2016 (in thousands):
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
Beginning balance
$
749

 
$
75

Accretion
(162
)
 
(9
)
Reclassification from non-accretable difference
106

 
—

Ending balance
$
693

 
$
66