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Loans Receivable, Net
 9 Months Ended
Sep. 30, 2017
Receivables [Abstract]  
Loans Receivable, Net
Loans Receivable, Net
Loans receivable, net at September 30, 2017 and December 31, 2016 consisted of the following (in thousands):
 
September 30, 2017
 
December 31, 2016
Commercial:
 
 
 
Commercial and industrial
$
183,420

 
$
152,569

Commercial real estate – owner occupied
553,971

 
534,214

Commercial real estate – investor
1,133,118

 
1,132,075

Total commercial
1,870,509

 
1,818,858

Consumer:
 
 
 
Residential mortgage
1,676,143

 
1,647,154

Residential construction
73,812

 
65,319

Home equity loans and lines
277,909

 
288,991

Other consumer
1,354

 
1,564

Total consumer
2,029,218

 
2,003,028

 
3,899,727

 
3,821,886

Purchased credit impaired (“PCI”) loans
4,867

 
7,575

Total Loans
3,904,594

 
3,829,461

Loans in process
(22,546
)
 
(14,249
)
Deferred origination costs, net
4,645

 
3,414

Allowance for loan losses
(16,584
)
 
(15,183
)
Total loans, net
$
3,870,109

 
$
3,803,443


 
At September 30, 2017 and December 31, 2016, loans in the amount of $15.1 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. At September 30, 2017, there were no loans that were 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 $2.5 million at September 30, 2017. The amount of foreclosed residential real estate property held by the Company was $1.2 million at September 30, 2017.
The Company defines 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 September 30, 2017, the impaired loan portfolio totaled $44.9 million for which there was a specific allocation in the allowance for loan losses of $616,000. 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 September 30, 2017 and 2016 was $43.1 million and $34.5 million, respectively. The average balance of impaired loans for the nine months ended September 30, 2017 and 2016 was $38.0 million and $34.3 million, respectively.
An analysis of the allowance for loan losses for the three and nine months ended September 30, 2017 and 2016 is as follows (in thousands):
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
Balance at beginning of period
$
16,557

 
$
16,678

 
$
15,183

 
$
16,722

Provision charged to operations
1,165

 
888

 
3,030

 
2,113

Charge-offs
(1,357
)
 
(2,116
)
 
(2,861
)
 
(3,511
)
Recoveries
219

 
167

 
1,232

 
293

Balance at end of period
$
16,584

 
$
15,617

 
$
16,584

 
$
15,617



The following table presents an analysis of the allowance for loan losses for the three and nine months ended September 30, 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 September 30, 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 September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
1,492

 
$
3,097

 
$
8,367

 
$
930

 
$
2,253

 
$
418

 
$
16,557

Provision (benefit) charged to operations
1,465

 
119

 
81

 
(122
)
 
(180
)
 
(198
)
 
1,165

Charge-offs
(1,284
)
 
—

 
—

 
(67
)
 
(6
)
 
—

 
(1,357
)
Recoveries
128

 
—

 
24

 
17

 
50

 
—

 
219

Balance at end of period
$
1,801

 
$
3,216

 
$
8,472

 
$
758

 
$
2,117

 
$
220

 
$
16,584

For the three months ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at beginning of period
$
6,006

 
$
2,711

 
$
4,713

 
$
1,107

 
$
1,209

 
$
932

 
$
16,678

Provision (benefit) charged to operations
(376
)
 
(168
)
 
104

 
(130
)
 
1,949

 
(491
)
 
888

Charge-offs
(167
)
 
—

 
—

 
(80
)
 
(1,869
)
 
—

 
(2,116
)
Recoveries
6

 
—

 
—

 
—

 
161

 
—

 
167

Balance at end of period
$
5,469

 
$
2,543

 
$
4,817

 
$
897

 
$
1,450

 
$
441

 
$
15,617

For the nine months ended September 30, 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
1,477

 
167

 
2,164

 
(346
)
 
(221
)
 
(211
)
 
3,030

Charge-offs
(2,485
)
 
(73
)
 
(84
)
 
(125
)
 
(94
)
 
—

 
(2,861
)
Recoveries
564

 
123

 
31

 
119

 
395

 
—

 
1,232

Balance at end of period
$
1,801

 
$
3,216

 
$
8,472

 
$
758

 
$
2,117

 
$
220

 
$
16,584

For the nine months ended September 30, 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
(867
)
 
1,261

 
(56
)
 
(98
)
 
1,665

 
208

 
2,113

Charge-offs
(319
)
 
(1,010
)
 
—

 
(146
)
 
(2,036
)
 
—

 
(3,511
)
Recoveries
65

 
—

 
—

 
46

 
182

 
—

 
293

Balance at end of period
$
5,469

 
$
2,543

 
$
4,817

 
$
897

 
$
1,450

 
$
441

 
$
15,617

September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Ending allowance balance attributed to loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Individually evaluated for impairment
$
—

 
$
—

 
$
616

 
$
—

 
$
—

 
$
—

 
$
616

Collectively evaluated for impairment
1,801

 
3,216

 
7,856

 
758

 
2,117

 
220

 
15,968

Total ending allowance balance
$
1,801

 
$
3,216

 
$
8,472

 
$
758

 
$
2,117

 
$
220

 
$
16,584

Loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans individually evaluated for impairment
$
12,484

 
$
11,537

 
$
17,535

 
$
2,478

 
$
893

 
$
—

 
$
44,927

Loans collectively evaluated for impairment
1,737,471

 
542,434

 
1,115,583

 
276,785

 
182,527

 
—

 
3,854,800

Total ending loan balance
$
1,749,955

 
$
553,971

 
$
1,133,118

 
$
279,263

 
$
183,420

 
$
—

 
$
3,899,727

 
Residential
Real Estate
 
Commercial
Real Estate –
Owner
Occupied
 
Commercial
Real Estate –
Investor
 
Consumer
 
Commercial
and Industrial
 
Unallocated
 
Total
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 September 30, 2017, and December 31, 2016, is as follows, excluding PCI loans (in thousands):
 
 
September 30, 2017
 
December 31, 2016
Impaired loans with no allocated allowance for loan losses
$
40,386

 
$
25,228

Impaired loans with allocated allowance for loan losses
4,541

 
5,814

 
$
44,927

 
$
31,042

Amount of the allowance for loan losses allocated
$
616

 
$
510


At September 30, 2017, impaired loans included troubled debt restructured (“TDR”) loans of $36.1 million, of which $35.8 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 September 30, 2017, and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016, is as follows, excluding PCI loans (in thousands):
 
 
Unpaid
Principal
Balance
 
Recorded
Investment
 
Allowance
for Loan
Losses
Allocated
As of September 30, 2017
 
 
 
 
 
With no related allowance recorded:
 
 
 
 
 
Residential real estate
$
12,896

 
$
12,484

 
$
—

Commercial real estate – owner occupied
12,233

 
11,537

 
—

Commercial real estate – investor
13,938

 
12,994

 
—

Consumer
2,939

 
2,478

 
—

Commercial and industrial
925

 
893

 
—

 
$
42,931

 
$
40,386

 
$
—

With an allowance recorded:
 
 
 
 
 
Residential real estate
$
—

 
$
—

 
$
—

Commercial real estate – owner occupied
—

 
—

 
—

Commercial real estate – investor
4,556

 
4,541

 
616

Consumer
—

 
—

 
—

Commercial and industrial
—

 
—

 
—

 
$
4,556

 
$
4,541

 
$
616

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 September 30,
 
2017
 
2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Residential real estate
$
12,791

 
$
128

 
$
13,451

 
$
171

Commercial real estate – owner occupied
11,217

 
335

 
17,198

 
119

Commercial real estate – investor
11,147

 
240

 
281

 
3

Consumer
2,495

 
36

 
2,340

 
44

Commercial and industrial
908

 
26

 
269

 
—

 
$
38,558

 
$
765

 
$
33,539

 
$
337

With an allowance recorded:
 
 
 
 
 
 
 
Residential real estate
$
—

 
$
—

 
$
107

 
$
1

Commercial real estate – owner occupied
—

 
—

 
—

 
—

Commercial real estate – investor
4,551

 
13

 
896

 
—

Consumer
—

 
—

 
—

 
—

Commercial and industrial
—

 
—

 
—

 
—

 
$
4,551

 
$
13

 
$
1,003

 
$
1

 
Nine Months Ended September 30,
 
2017
 
2016
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Average
Recorded
Investment
 
Interest
Income
Recognized
With no related allowance recorded:
 
 
 
 
 
 
 
Residential real estate
$
11,009

 
$
401

 
$
13,326

 
$
437

Commercial real estate – owner occupied
11,080

 
520

 
17,333

 
406

Commercial real estate – investor
6,550

 
487

 
303

 
9

Consumer
2,368

 
106

 
2,220

 
105

Commercial and industrial
588

 
50

 
270

 
—

 
$
31,595

 
$
1,564

 
$
33,452

 
$
957

With an allowance recorded:
 
 
 
 
 
 
 
Residential real estate
$
1,981

 
$
62

 
$
108

 
$
3

Commercial real estate – owner occupied
—

 
—

 
—

 
—

Commercial real estate – investor
4,233

 
81

 
755

 
—

Consumer
148

 
6

 
—

 
—

Commercial and industrial
—

 
—

 
—

 
—

 
$
6,362

 
$
149

 
$
863

 
$
3

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of September 30, 2017 and December 31, 2016, excluding PCI loans (in thousands):
 
September 30, 2017
 
December 31, 2016
Residential real estate
$
3,551

 
$
8,126

Commercial real estate – owner occupied
923

 
2,414

Commercial real estate – investor
8,720

 
521

Consumer
1,864

 
2,064

Commercial and industrial
63

 
441

 
$
15,121

 
$
13,566


 
The following table presents the aging of the recorded investment in past due loans as of September 30, 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
September 30, 2017
 
 
 
 
 
 
 
 
 
 
 
Residential real estate
$
12,736

 
$
6,872

 
$
2,277

 
$
21,885

 
$
1,728,070

 
$
1,749,955

Commercial real estate – owner occupied
711

 
—

 
289

 
1,000

 
552,971

 
553,971

Commercial real estate – investor
2,301

 
173

 
8,146

 
10,620

 
1,122,498

 
1,133,118

Consumer
768

 
491

 
1,486

 
2,745

 
276,518

 
279,263

Commercial and industrial
—

 
1,874

 
64

 
1,938

 
181,482

 
183,420

 
$
16,516

 
$
9,410

 
$
12,262

 
$
38,188

 
$
3,861,539

 
$
3,899,727

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 September 30, 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) is as follows: 
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
September 30, 2017
 
 
 
 
 
 
 
 
 
Commercial real estate – owner occupied
$
531,493

 
$
4,349

 
$
18,129

 
$
—

 
$
553,971

Commercial real estate – investor
1,100,142

 
10,768

 
22,208

 
—

 
1,133,118

Commercial and industrial
176,619

 
3,520

 
3,281

 
—

 
183,420

 
$
1,808,254

 
$
18,637

 
$
43,618

 
$
—

 
$
1,870,509

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 September 30, 2017 and December 31, 2016, excluding PCI loans (in thousands):
 
Residential Real Estate
 
Residential
 
Consumer
September 30, 2017
 
 
 
Performing
$
1,746,404

 
$
277,399

Non-performing
3,551

 
1,864

 
$
1,749,955

 
$
279,263

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 September 30, 2017, and December 31, 2016, were $270,000 and $3.5 million, respectively, of troubled debt restructurings. At September 30, 2017, the Company had no specific reserves allocated to loans that are classified as troubled debt restructurings. At December 31, 2016, the Company had allocated $510,000 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 September 30, 2017, and December 31, 2016, which totaled $35.8 million and $27.0 million, respectively. 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 and nine months ended September 30, 2017 and 2016, and troubled debt restructurings modified within the previous year and which defaulted during the three and nine months ended September 30, 2017 and 2016, (dollars in thousands):
 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Three months ended September 30, 2017
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Residential real estate
2

 
$
328

 
$
357

Commercial real estate - owner occupied
1

 
700

 
700

Commercial real estate - investor
1

 
700

 
700

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

  
None

 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Nine months ended September 30, 2017
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Residential real estate
6

 
$
1,354

 
$
1,356

Commercial real estate - owner occupied
4

 
3,309

 
3,309

Commercial real estate – investor
4

 
6,362

 
6,484

Commercial and industrial
1

 
665

 
665

 
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 September 30, 2016
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Residential real estate
1

 
$
455

 
$
455

Consumer
1

 
602

 
602

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

  
None

 
Number of Loans
 
Pre-modification
Recorded Investment
 
Post-modification
Recorded Investment
Nine months ended September 30, 2016
 
 
 
 
 
Troubled Debt Restructurings:
 
 
 
 
 
Residential real estate
3

 
$
674

 
$
673

Commercial real estate – investor
1

 
256

 
270

Consumer
3

 
665

 
665

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

  
None



As part of the Cape, Ocean Shore and Colonial American Bank 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 Bank 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 and nine months ended September 30, 2017 and 2016 (in thousands):
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
Beginning balance
$
1,465

 
$
749

 
$
503

 
$
75

Acquisition
—

 
—

 
—

 
576

Accretion
(328
)
 
(642
)
 
(196
)
 
(344
)
Reclassification from non-accretable difference
13

 
1,043

 
—

 
—

Ending balance
$
1,150

 
$
1,150

 
$
307

 
$
307