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Loans Receivable (Tables)
6 Months Ended
Jun. 30, 2019
Loans and Leases Receivable Disclosure [Abstract]  
Financing Receivable Credit Quality Indicators [Table Text Block]
The following tables present the balance of loans receivable by credit quality indicator as of June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
Pass
 
OAEM
 
Substandard
 
Doubtful/Loss
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
761,961

 
$
28,344

 
$
54,741

 
$

 
$
845,046

Owner-occupied commercial real estate
731,749

 
25,870

 
14,880

 

 
772,499

Non-owner occupied commercial real estate
1,309,875

 
9,936

 
13,236

 

 
1,333,047

Total commercial business
2,803,585

 
64,150

 
82,857

 

 
2,950,592

One-to-four family residential
115,707

 

 
1,718

 

 
117,425

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
110,526

 

 
793

 

 
111,319

Five or more family residential and commercial properties
142,824

 
517

 

 

 
143,341

Total real estate construction and land development
253,350

 
517

 
793

 

 
254,660

Consumer
388,503

 

 
3,899

 
524

 
392,926

Gross loans receivable
$
3,561,145

 
$
64,667

 
$
89,267

 
$
524

 
$
3,715,603

 
December 31, 2018
 
Pass
 
OAEM
 
Substandard
 
Doubtful/Loss
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
788,395

 
$
16,168

 
$
49,043

 
$

 
$
853,606

Owner-occupied commercial real estate
741,227

 
27,724

 
10,863

 

 
779,814

Non-owner occupied commercial real estate
1,283,077

 
9,438

 
11,948

 

 
1,304,463

Total commercial business
2,812,699

 
53,330

 
71,854

 

 
2,937,883

One-to-four family residential
100,401

 

 
1,362

 

 
101,763

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
101,519

 
258

 
953

 

 
102,730

Five or more family residential and commercial properties
112,678

 
52

 

 

 
112,730

Total real estate construction and land development
214,197

 
310

 
953

 

 
215,460

Consumer
390,808

 

 
4,213

 
524

 
395,545

Gross loans receivable
$
3,518,105

 
$
53,640

 
$
78,382

 
$
524

 
$
3,650,651


Loans receivable at June 30, 2019 and December 31, 2018 consisted of the following portfolio segments and classes:
 
June 30, 2019
 
December 31, 2018
 
(In thousands)
Commercial business:
 
 
 
Commercial and industrial
$
845,046

 
$
853,606

Owner-occupied commercial real estate
772,499

 
779,814

Non-owner occupied commercial real estate
1,333,047

 
1,304,463

Total commercial business
2,950,592

 
2,937,883

One-to-four family residential
117,425

 
101,763

Real estate construction and land development:
 
 
 
One-to-four family residential
111,319

 
102,730

Five or more family residential and commercial properties
143,341

 
112,730

Total real estate construction and land development
254,660

 
215,460

Consumer
392,926

 
395,545

Gross loans receivable
3,715,603

 
3,650,651

Net deferred loan costs
2,680

 
3,509

 Loans receivable, net
3,718,283

 
3,654,160

Allowance for loan losses
(36,363
)
 
(35,042
)
 Total loans receivable, net
$
3,681,920

 
$
3,619,118


Past Due Financing Receivables [Table Text Block]
The balances of past due loans, segregated by segments and classes of loans, as of June 30, 2019 and December 31, 2018 were as follows:
 
June 30, 2019
 
30-89 Days
 
90 Days or
Greater
 
Total Past 
Due
 
Current
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,991

 
$
1,552

 
$
3,543

 
$
838,666

 
$
842,209

Owner-occupied commercial real estate
646

 
1,073

 
1,719

 
763,661

 
765,380

Non-owner occupied commercial real estate
286

 
1,843

 
2,129

 
1,324,516

 
1,326,645

Total commercial business
2,923

 
4,468

 
7,391

 
2,926,843

 
2,934,234

One-to-four family residential
475

 

 
475

 
113,733

 
114,208

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential

 

 

 
110,993

 
110,993

Five or more family residential and commercial properties
258

 

 
258

 
142,929

 
143,187

Total real estate construction and land development
258

 

 
258

 
253,922

 
254,180

Consumer
1,563

 

 
1,563

 
389,066

 
390,629

Past due gross loans receivable, excluding PCI loans
5,219

 
4,468

 
9,687

 
3,683,564

 
3,693,251

PCI loans
647

 
18

 
665

 
21,687

 
22,352

Gross loans receivable
$
5,866

 
$
4,486

 
$
10,352

 
$
3,705,251

 
$
3,715,603


 
December 31, 2018
 
30-89 Days
 
90 Days or
Greater
 
Total Past 
Due
 
Current
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,711

 
$
2,281

 
$
4,992

 
$
845,181

 
$
850,173

Owner-occupied commercial real estate
513

 
408

 
921

 
771,677

 
772,598

Non-owner occupied commercial real estate
3,412

 
1,103

 
4,515

 
1,292,888

 
1,297,403

Total commercial business
6,636

 
3,792

 
10,428

 
2,909,746

 
2,920,174

One-to-four family residential
227

 

 
227

 
98,221

 
98,448

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
665

 
234

 
899

 
101,451

 
102,350

Five or more family residential and commercial properties

 

 

 
112,688

 
112,688

Total real estate construction and land development
665

 
234

 
899

 
214,139

 
215,038

Consumer
2,559

 

 
2,559

 
389,525

 
392,084

Past due gross loans receivable, excluding PCI loans
10,087

 
4,026

 
14,113

 
3,611,631

 
3,625,744

PCI loans
2,271

 
550

 
2,821

 
22,086

 
24,907

Gross loans receivable
$
12,358

 
$
4,576

 
$
16,934

 
$
3,633,717

 
$
3,650,651


Schedule of Impaired Purchased Loans Accretable Yield [Table Text Block]
The following table summarizes the accretable yield on the PCI loans for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Balance at the beginning of the period
$
8,460

 
$
11,269

 
$
9,493

 
$
11,224

Accretion
(513
)
 
(587
)
 
(1,094
)
 
(1,368
)
Disposal and other
(198
)
 
(273
)
 
(650
)
 
(1,971
)
Reclassification from nonaccretable difference
823

 
(349
)
 
823

 
2,175

Balance at the end of the period
$
8,572

 
$
10,060

 
$
8,572

 
$
10,060




Financing Receivables [Text Block]
Loans Receivable
(a) Loan Origination/Risk Management
The Company originates loans in the ordinary course of business and has also acquired loans through mergers and acquisitions. Disclosures related to the Company's recorded investment in loans receivable generally exclude accrued interest receivable and net deferred fees or costs as they were deemed insignificant.
Loans acquired in a business combination are further classified as “purchased” loans. Loans purchased with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are accounted for under FASB ASC 310-30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality. These loans are identified as "PCI" loans. Loans purchased that are not accounted for under FASB ASC 310-30 are accounted for under FASB ASC 310-20, Receivables—Nonrefundable Fees and Other Costs, and are referred to as "non-PCI" loans. There were no PCI loans acquired in the Premier and Puget Mergers.
The Company categorizes loans in one of the four segments of the total loan portfolio: commercial business, one-to-four family residential, real estate construction and land development and consumer. Within these segments are classes of loans for which management monitors and assesses credit risk in the loan portfolios.
Loans receivable at June 30, 2019 and December 31, 2018 consisted of the following portfolio segments and classes:
 
June 30, 2019
 
December 31, 2018
 
(In thousands)
Commercial business:
 
 
 
Commercial and industrial
$
845,046

 
$
853,606

Owner-occupied commercial real estate
772,499

 
779,814

Non-owner occupied commercial real estate
1,333,047

 
1,304,463

Total commercial business
2,950,592

 
2,937,883

One-to-four family residential
117,425

 
101,763

Real estate construction and land development:
 
 
 
One-to-four family residential
111,319

 
102,730

Five or more family residential and commercial properties
143,341

 
112,730

Total real estate construction and land development
254,660

 
215,460

Consumer
392,926

 
395,545

Gross loans receivable
3,715,603

 
3,650,651

Net deferred loan costs
2,680

 
3,509

 Loans receivable, net
3,718,283

 
3,654,160

Allowance for loan losses
(36,363
)
 
(35,042
)
 Total loans receivable, net
$
3,681,920

 
$
3,619,118


(b) Concentrations of Credit
As of June 30, 2019, and December 31, 2018, there were no concentrations of loans related to any single industry in excess of 10% of the Company’s total loans.
(c) Credit Quality Indicators
As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the risk grade of the loans, (ii) the level of classified loans, (iii) net charge-offs, (iv) nonperforming loans and (v) the general economic conditions of the United States of America, and specifically the states of Washington and Oregon. The Company utilizes a risk grading matrix to assign a risk grade to each loan on a scale of 1 to 10. Risk grades are aggregated to create the risk categories of "Pass" for grades 1 to 6, OAEM for grade 7, "Substandard" for grade 8, "Doubtful" for grade 9 and "Loss" for grade 10.
The following tables present the balance of loans receivable by credit quality indicator as of June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
Pass
 
OAEM
 
Substandard
 
Doubtful/Loss
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
761,961

 
$
28,344

 
$
54,741

 
$

 
$
845,046

Owner-occupied commercial real estate
731,749

 
25,870

 
14,880

 

 
772,499

Non-owner occupied commercial real estate
1,309,875

 
9,936

 
13,236

 

 
1,333,047

Total commercial business
2,803,585

 
64,150

 
82,857

 

 
2,950,592

One-to-four family residential
115,707

 

 
1,718

 

 
117,425

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
110,526

 

 
793

 

 
111,319

Five or more family residential and commercial properties
142,824

 
517

 

 

 
143,341

Total real estate construction and land development
253,350

 
517

 
793

 

 
254,660

Consumer
388,503

 

 
3,899

 
524

 
392,926

Gross loans receivable
$
3,561,145

 
$
64,667

 
$
89,267

 
$
524

 
$
3,715,603

 
December 31, 2018
 
Pass
 
OAEM
 
Substandard
 
Doubtful/Loss
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
788,395

 
$
16,168

 
$
49,043

 
$

 
$
853,606

Owner-occupied commercial real estate
741,227

 
27,724

 
10,863

 

 
779,814

Non-owner occupied commercial real estate
1,283,077

 
9,438

 
11,948

 

 
1,304,463

Total commercial business
2,812,699

 
53,330

 
71,854

 

 
2,937,883

One-to-four family residential
100,401

 

 
1,362

 

 
101,763

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
101,519

 
258

 
953

 

 
102,730

Five or more family residential and commercial properties
112,678

 
52

 

 

 
112,730

Total real estate construction and land development
214,197

 
310

 
953

 

 
215,460

Consumer
390,808

 

 
4,213

 
524

 
395,545

Gross loans receivable
$
3,518,105

 
$
53,640

 
$
78,382

 
$
524

 
$
3,650,651


Potential problem loans are loans classified as OAEM or worse that are currently accruing interest and are not considered impaired, but which management is closely monitoring because the financial information of the borrower causes concern as to their ability to meet their loan repayment terms. Potential problem loans may include PCI loans as these loans continue to accrete loan discounts established at acquisition based on the guidance of FASB ASC 310-30. Potential problem loans as of June 30, 2019 and December 31, 2018 were $114.1 million and $101.3 million, respectively.
(d) Nonaccrual Loans
Nonaccrual loans, segregated by segments and classes of loans, were as follows as of June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
December 31, 2018
 
(In thousands)
Commercial business:
 
 
 
Commercial and industrial
$
11,133

 
$
6,639

Owner-occupied commercial real estate
4,725

 
4,212

Non-owner occupied commercial real estate
2,429

 
1,713

Total commercial business
18,287

 
12,564

One-to-four family residential
19

 
71

Real estate construction and land development:
 
 
 
One-to-four family residential
793

 
899

Total real estate construction and land development
793

 
899

Consumer
194

 
169

Nonaccrual loans
$
19,293

 
$
13,703


PCI loans are not included in the nonaccrual loan table above because these loans are accounted for under FASB ASC 310-30, which provides that accretable yield is calculated based on a loan's expected cash flow even if the loan is not performing under its contractual terms.
(e) Past due loans
The Company performs an aging analysis of past due loans using policies consistent with regulatory reporting requirements with categories of 30-89 days past due and 90 or more days past due. PCI loans are not included in the past due loans table below other than as a reconciling item.
The balances of past due loans, segregated by segments and classes of loans, as of June 30, 2019 and December 31, 2018 were as follows:
 
June 30, 2019
 
30-89 Days
 
90 Days or
Greater
 
Total Past 
Due
 
Current
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
1,991

 
$
1,552

 
$
3,543

 
$
838,666

 
$
842,209

Owner-occupied commercial real estate
646

 
1,073

 
1,719

 
763,661

 
765,380

Non-owner occupied commercial real estate
286

 
1,843

 
2,129

 
1,324,516

 
1,326,645

Total commercial business
2,923

 
4,468

 
7,391

 
2,926,843

 
2,934,234

One-to-four family residential
475

 

 
475

 
113,733

 
114,208

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential

 

 

 
110,993

 
110,993

Five or more family residential and commercial properties
258

 

 
258

 
142,929

 
143,187

Total real estate construction and land development
258

 

 
258

 
253,922

 
254,180

Consumer
1,563

 

 
1,563

 
389,066

 
390,629

Past due gross loans receivable, excluding PCI loans
5,219

 
4,468

 
9,687

 
3,683,564

 
3,693,251

PCI loans
647

 
18

 
665

 
21,687

 
22,352

Gross loans receivable
$
5,866

 
$
4,486

 
$
10,352

 
$
3,705,251

 
$
3,715,603


 
December 31, 2018
 
30-89 Days
 
90 Days or
Greater
 
Total Past 
Due
 
Current
 
Total
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,711

 
$
2,281

 
$
4,992

 
$
845,181

 
$
850,173

Owner-occupied commercial real estate
513

 
408

 
921

 
771,677

 
772,598

Non-owner occupied commercial real estate
3,412

 
1,103

 
4,515

 
1,292,888

 
1,297,403

Total commercial business
6,636

 
3,792

 
10,428

 
2,909,746

 
2,920,174

One-to-four family residential
227

 

 
227

 
98,221

 
98,448

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
665

 
234

 
899

 
101,451

 
102,350

Five or more family residential and commercial properties

 

 

 
112,688

 
112,688

Total real estate construction and land development
665

 
234

 
899

 
214,139

 
215,038

Consumer
2,559

 

 
2,559

 
389,525

 
392,084

Past due gross loans receivable, excluding PCI loans
10,087

 
4,026

 
14,113

 
3,611,631

 
3,625,744

PCI loans
2,271

 
550

 
2,821

 
22,086

 
24,907

Gross loans receivable
$
12,358

 
$
4,576

 
$
16,934

 
$
3,633,717

 
$
3,650,651


There were no loans 90 days or more past due that were still accruing interest as of June 30, 2019 or December 31, 2018, excluding PCI loans.
(f) Impaired loans
Impaired loans include nonaccrual loans and performing TDR loans. The balances of impaired loans as of June 30, 2019 and December 31, 2018 are set forth in the following tables:
 
June 30, 2019
 
Recorded
Investment With
No Specific
Valuation
Allowance
 
Recorded
Investment With
Specific
Valuation
Allowance
 
Total
Recorded
Investment
 
Unpaid
Contractual
Principal
Balance
 
Related
Specific
Valuation
Allowance
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
4,815

 
$
22,793

 
$
27,608

 
$
28,909

 
$
3,211

Owner-occupied commercial real estate
817

 
5,484

 
6,301

 
6,752

 
1,294

Non-owner occupied commercial real estate
5,132

 
4,543

 
9,675

 
9,753

 
629

Total commercial business
10,764

 
32,820

 
43,584

 
45,414

 
5,134

One-to-four family residential

 
224

 
224

 
231

 
57

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
560

 
233

 
793

 
878

 
28

Total real estate construction and land development
560

 
233

 
793

 
878

 
28

Consumer

 
617

 
617

 
628

 
154

Total
$
11,324

 
$
33,894

 
$
45,218

 
$
47,151

 
$
5,373

 
December 31, 2018
 
Recorded
Investment With
No Specific
Valuation
Allowance
 
Recorded
Investment With
Specific
Valuation
Allowance
 
Total
Recorded
Investment
 
Unpaid
Contractual
Principal
Balance
 
Related
Specific
Valuation
Allowance
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,523

 
$
20,119

 
$
22,642

 
$
24,176

 
$
2,607

Owner-occupied commercial real estate
816

 
5,000

 
5,816

 
6,150

 
1,142

Non-owner occupied commercial real estate
3,352

 
2,924

 
6,276

 
6,414

 
206

Total commercial business
6,691

 
28,043

 
34,734

 
36,740

 
3,955

One-to-four family residential

 
279

 
279

 
293

 
76

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
899

 

 
899

 
1,662

 

Total real estate construction and land development
899

 

 
899

 
1,662

 

Consumer

 
527

 
527

 
538

 
139

Total
$
7,590

 
$
28,849

 
$
36,439

 
$
39,233

 
$
4,170


The average recorded investment of impaired loans for the three and six months ended June 30, 2019 and 2018 are set forth in the following table:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
$
25,219

 
$
17,299

 
$
24,426

 
$
15,534

Owner-occupied commercial real estate
6,178

 
12,643

 
6,057

 
12,622

Non-owner occupied commercial real estate
8,221

 
10,426

 
7,506

 
10,366

Total commercial business
39,618

 
40,368

 
37,989

 
38,522

One-to-four family residential
249

 
293

 
259

 
295

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
858

 
1,116

 
872

 
1,159

Five or more family residential and commercial properties

 

 

 
215

Total real estate construction and land development
858

 
1,116

 
872

 
1,374

Consumer
607

 
381

 
581

 
401

Total
$
41,332

 
$
42,158

 
$
39,701

 
$
40,592


For the three and six months ended June 30, 2019 and 2018, no interest income was recognized subsequent to a loan’s classification as nonaccrual. For the three and six months ended June 30, 2019, the Bank recorded $397,000 and $698,000, respectively, of interest income related to performing TDR loans. For the three and six months ended June 30, 2018, the Bank recorded $360,000 and $686,000, respectively, of interest income related to performing TDR loans.
(g) Troubled Debt Restructured Loans
The recorded investment balance and related allowance for loan losses of performing and nonaccrual TDR loans as of June 30, 2019 and December 31, 2018 were as follows:
 
June 30, 2019
 
December 31, 2018
 
Performing
TDRs
 
Nonaccrual
TDRs
 
Performing
TDRs
 
Nonaccrual
TDRs
 
(In thousands)
TDR loans
$
25,925

 
$
8,090

 
$
22,736

 
$
6,943

Allowance for loan losses on TDR loans
2,887

 
981

 
2,257

 
658


The unfunded commitment to borrowers related to TDR loans was $1.7 million and $943,000 at June 30, 2019 and December 31, 2018, respectively.
Loans that were modified as TDR loans during the three and six months ended June 30, 2019 and 2018 are set forth in the following table:
 
Three Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
14

 
$
8,628

 
9

 
$
2,981

Owner-occupied commercial real estate
1

 
710

 
1

 
570

Non-owner occupied commercial real estate
2

 
3,554

 

 

Total commercial business
17

 
12,892

 
10

 
3,551

Consumer
3

 
53

 
3

 
33

Total loans modified as TDR loans
20

 
$
12,945

 
13

 
$
3,584

(1) 
Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the three months ended June 30, 2019 and 2018.
(2) 
Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. There were no advances on these types of loans during the three months ended June 30, 2019 and 2018.
 
Six Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
20

 
$
18,066

 
17

 
$
6,193

Owner-occupied commercial real estate
3

 
1,628

 
1

 
570

Non-owner occupied commercial real estate
3

 
5,643

 
2

 
2,380

Total commercial business
26

 
25,337

 
20

 
9,143

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
1

 
560

 

 

Total real estate construction and land development
1

 
560

 

 

Consumer
8

 
162

 
6

 
107

Total TDR loans
35

 
$
26,059

 
26

 
$
9,250


(1) 
Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the six months ended June 30, 2019 and 2018.
(2) 
Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. There were no advances on these types of loans during the six months ended June 30, 2019 and 2018.
The tables above includes 12 and 20 loans, respectively, for the three and six months ended June 30, 2019 and 10 and 23 loans, respectively, for the three and six months ended June 30, 2018 that were previously reported as TDR loans. The Bank typically grants shorter extension periods to continually monitor these TDR loans despite the fact that the extended date might not be the date the Bank expects sufficient cash flow from these borrowers. The Bank does not consider these modifications a subsequent default of a TDR as new loan terms, specifically new maturity
dates, were granted. Of the remaining first-reported TDR loans, the concessions granted largely consisted of maturity extensions, interest rate modifications or a combination of both. The potential losses related to TDR loans are considered in the period the loan was first reported as a TDR loan and are adjusted, as necessary, in the current period based on more recent information. The related specific valuation allowance at June 30, 2019 for loans that were modified as TDR loans during the six months ended June 30, 2019 was $3.1 million.
Loans that were modified during the previous twelve months that subsequently defaulted during the three and six months ended June 30, 2019 and 2018 are set forth in the following tables:
 
Three Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
 
Recorded Investments
 
Number of
Contracts
 
Recorded Investments
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
6

 
$
1,278

 
4

 
$
2,725

Owner-occupied properties
1

 
399

 

 

Total commercial business
7

 
1,677

 
4

 
2,725

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
1

 
560

 

 

Total real estate construction and land development
1

 
560

 

 

Total
8

 
$
2,237

 
4

 
$
2,725

 
Six Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
 
Recorded Investments
 
Number of
Contracts
 
Recorded Investments
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
6

 
$
1,278

 
5

 
$
3,006

Owner-occupied commercial real estate
2

 
1,109

 

 

Non-owner occupied commercial real estate
1

 
586

 
1

 
73

Total commercial business
9

 
2,973

 
6

 
3,079

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
1

 
560

 
2

 
775

Total real estate construction and land development
1

 
560

 
2

 
775

Total
10

 
$
3,533

 
8

 
$
3,854


During the three and six months ended June 30, 2019, eight loans and ten loans, respectively, defaulted because each was past its modified maturity date, and the borrower has not subsequently repaid the credits. One loan defaulted during both the three and six months ended June 30, 2019. The Bank has chosen not to extend further the maturity date on these loans. The Bank had a specific valuation allowance of $304,000 at June 30, 2019 related to these TDR loans which defaulted during the six months ended June 30, 2019.
During the three and six months ended June 30, 2018, two and six loans, respectively, defaulted because each was past its modified maturity date, and the borrower has not subsequently repaid the credits. The Bank had chosen not to extend the maturities on these loans. In addition, during each of the three and six months ended June 30, 2018, two loans defaulted because the borrowers were more than 90 days delinquent on their scheduled loan payments. The Bank had no specific valuation allowance at June 30, 2018 related to TDR loans which defaulted during the six months ended June 30, 2018.
(h) Purchased Credit Impaired Loans
The following table reflects the outstanding principal balance and recorded investment of the PCI loans at June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
December 31, 2018
 
Outstanding Principal
 
Recorded Investment
 
Outstanding Principal
 
Recorded Investment
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
$
5,232

 
$
2,837

 
$
6,319

 
$
3,433

Owner-occupied commercial real estate
7,260

 
7,120

 
7,830

 
7,215

Non-owner occupied commercial real estate
8,019

 
6,402

 
8,685

 
7,059

Total commercial business
20,511

 
16,359

 
22,834

 
17,707

One-to-four family residential
3,056

 
3,217

 
3,169

 
3,315

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential

 
326

 
67

 
380

Five or more family residential and commercial properties
182

 
154

 
188

 
43

Total real estate construction and land development
182

 
480

 
255

 
423

Consumer
1,012

 
2,297

 
2,203

 
3,462

Gross PCI loans
$
24,761

 
$
22,353

 
$
28,461

 
$
24,907

On the acquisition dates, the amount by which the undiscounted expected cash flows of the PCI loans exceeded the estimated fair value of the loan is the “accretable yield.” The accretable yield is then measured at each financial reporting date and represents the difference between the remaining undiscounted expected cash flows and the current carrying value of the PCI loans.
The following table summarizes the accretable yield on the PCI loans for the three and six months ended June 30, 2019 and 2018:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Balance at the beginning of the period
$
8,460

 
$
11,269

 
$
9,493

 
$
11,224

Accretion
(513
)
 
(587
)
 
(1,094
)
 
(1,368
)
Disposal and other
(198
)
 
(273
)
 
(650
)
 
(1,971
)
Reclassification from nonaccretable difference
823

 
(349
)
 
823

 
2,175

Balance at the end of the period
$
8,572

 
$
10,060

 
$
8,572

 
$
10,060


Impaired Financing Receivables [Table Text Block]
Impaired loans include nonaccrual loans and performing TDR loans. The balances of impaired loans as of June 30, 2019 and December 31, 2018 are set forth in the following tables:
 
June 30, 2019
 
Recorded
Investment With
No Specific
Valuation
Allowance
 
Recorded
Investment With
Specific
Valuation
Allowance
 
Total
Recorded
Investment
 
Unpaid
Contractual
Principal
Balance
 
Related
Specific
Valuation
Allowance
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
4,815

 
$
22,793

 
$
27,608

 
$
28,909

 
$
3,211

Owner-occupied commercial real estate
817

 
5,484

 
6,301

 
6,752

 
1,294

Non-owner occupied commercial real estate
5,132

 
4,543

 
9,675

 
9,753

 
629

Total commercial business
10,764

 
32,820

 
43,584

 
45,414

 
5,134

One-to-four family residential

 
224

 
224

 
231

 
57

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
560

 
233

 
793

 
878

 
28

Total real estate construction and land development
560

 
233

 
793

 
878

 
28

Consumer

 
617

 
617

 
628

 
154

Total
$
11,324

 
$
33,894

 
$
45,218

 
$
47,151

 
$
5,373

 
December 31, 2018
 
Recorded
Investment With
No Specific
Valuation
Allowance
 
Recorded
Investment With
Specific
Valuation
Allowance
 
Total
Recorded
Investment
 
Unpaid
Contractual
Principal
Balance
 
Related
Specific
Valuation
Allowance
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
2,523

 
$
20,119

 
$
22,642

 
$
24,176

 
$
2,607

Owner-occupied commercial real estate
816

 
5,000

 
5,816

 
6,150

 
1,142

Non-owner occupied commercial real estate
3,352

 
2,924

 
6,276

 
6,414

 
206

Total commercial business
6,691

 
28,043

 
34,734

 
36,740

 
3,955

One-to-four family residential

 
279

 
279

 
293

 
76

Real estate construction and land development:
 
 
 
 
 
 
 
 
 
One-to-four family residential
899

 

 
899

 
1,662

 

Total real estate construction and land development
899

 

 
899

 
1,662

 

Consumer

 
527

 
527

 
538

 
139

Total
$
7,590

 
$
28,849

 
$
36,439

 
$
39,233

 
$
4,170


Schedule of nonaccrual loans
Nonaccrual loans, segregated by segments and classes of loans, were as follows as of June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
December 31, 2018
 
(In thousands)
Commercial business:
 
 
 
Commercial and industrial
$
11,133

 
$
6,639

Owner-occupied commercial real estate
4,725

 
4,212

Non-owner occupied commercial real estate
2,429

 
1,713

Total commercial business
18,287

 
12,564

One-to-four family residential
19

 
71

Real estate construction and land development:
 
 
 
One-to-four family residential
793

 
899

Total real estate construction and land development
793

 
899

Consumer
194

 
169

Nonaccrual loans
$
19,293

 
$
13,703


Schedule of average recorded investment impaired loans including restructuring loans
The average recorded investment of impaired loans for the three and six months ended June 30, 2019 and 2018 are set forth in the following table:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
$
25,219

 
$
17,299

 
$
24,426

 
$
15,534

Owner-occupied commercial real estate
6,178

 
12,643

 
6,057

 
12,622

Non-owner occupied commercial real estate
8,221

 
10,426

 
7,506

 
10,366

Total commercial business
39,618

 
40,368

 
37,989

 
38,522

One-to-four family residential
249

 
293

 
259

 
295

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
858

 
1,116

 
872

 
1,159

Five or more family residential and commercial properties

 

 

 
215

Total real estate construction and land development
858

 
1,116

 
872

 
1,374

Consumer
607

 
381

 
581

 
401

Total
$
41,332

 
$
42,158

 
$
39,701

 
$
40,592


Recorded investment balance and related allowance for loan losses of accruing and non-accruing TDRs
The recorded investment balance and related allowance for loan losses of performing and nonaccrual TDR loans as of June 30, 2019 and December 31, 2018 were as follows:
 
June 30, 2019
 
December 31, 2018
 
Performing
TDRs
 
Nonaccrual
TDRs
 
Performing
TDRs
 
Nonaccrual
TDRs
 
(In thousands)
TDR loans
$
25,925

 
$
8,090

 
$
22,736

 
$
6,943

Allowance for loan losses on TDR loans
2,887

 
981

 
2,257

 
658


Troubled debt restructurings on financing receivables
Loans that were modified as TDR loans during the three and six months ended June 30, 2019 and 2018 are set forth in the following table:
 
Three Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
14

 
$
8,628

 
9

 
$
2,981

Owner-occupied commercial real estate
1

 
710

 
1

 
570

Non-owner occupied commercial real estate
2

 
3,554

 

 

Total commercial business
17

 
12,892

 
10

 
3,551

Consumer
3

 
53

 
3

 
33

Total loans modified as TDR loans
20

 
$
12,945

 
13

 
$
3,584

(1) 
Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the three months ended June 30, 2019 and 2018.
(2) 
Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. There were no advances on these types of loans during the three months ended June 30, 2019 and 2018.
 
Six Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
Number of
Contracts
(1)
 
Recorded Investment
(1)(2)
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
20

 
$
18,066

 
17

 
$
6,193

Owner-occupied commercial real estate
3

 
1,628

 
1

 
570

Non-owner occupied commercial real estate
3

 
5,643

 
2

 
2,380

Total commercial business
26

 
25,337

 
20

 
9,143

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
1

 
560

 

 

Total real estate construction and land development
1

 
560

 

 

Consumer
8

 
162

 
6

 
107

Total TDR loans
35

 
$
26,059

 
26

 
$
9,250


(1) 
Number of contracts and outstanding principal balance represent loans which have balances as of period end as certain loans may have been paid-down or charged-off during the six months ended June 30, 2019 and 2018.
(2) 
Includes subsequent payments after modifications and reflects the balance as of period end. As the Bank did not forgive any principal or interest balance as part of the loan modification, the Bank’s recorded investment in each loan at the date of modification (pre-modification) did not change as a result of the modification (post-modification), except when the modification was the initial advance on a one-to-four family residential real estate construction and land development loan under a master guidance line. There were no advances on these types of loans during the six months ended June 30, 2019 and 2018.
Troubled debt restructuring loans, subsequently defaulted
Loans that were modified during the previous twelve months that subsequently defaulted during the three and six months ended June 30, 2019 and 2018 are set forth in the following tables:
 
Three Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
 
Recorded Investments
 
Number of
Contracts
 
Recorded Investments
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
6

 
$
1,278

 
4

 
$
2,725

Owner-occupied properties
1

 
399

 

 

Total commercial business
7

 
1,677

 
4

 
2,725

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
1

 
560

 

 

Total real estate construction and land development
1

 
560

 

 

Total
8

 
$
2,237

 
4

 
$
2,725

 
Six Months Ended June 30,
 
2019
 
2018
 
Number of
Contracts
 
Recorded Investments
 
Number of
Contracts
 
Recorded Investments
 
(Dollars in thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
6

 
$
1,278

 
5

 
$
3,006

Owner-occupied commercial real estate
2

 
1,109

 

 

Non-owner occupied commercial real estate
1

 
586

 
1

 
73

Total commercial business
9

 
2,973

 
6

 
3,079

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential
1

 
560

 
2

 
775

Total real estate construction and land development
1

 
560

 
2

 
775

Total
10

 
$
3,533

 
8

 
$
3,854


Purchased impaired loans
The following table reflects the outstanding principal balance and recorded investment of the PCI loans at June 30, 2019 and December 31, 2018:
 
June 30, 2019
 
December 31, 2018
 
Outstanding Principal
 
Recorded Investment
 
Outstanding Principal
 
Recorded Investment
 
(In thousands)
Commercial business:
 
 
 
 
 
 
 
Commercial and industrial
$
5,232

 
$
2,837

 
$
6,319

 
$
3,433

Owner-occupied commercial real estate
7,260

 
7,120

 
7,830

 
7,215

Non-owner occupied commercial real estate
8,019

 
6,402

 
8,685

 
7,059

Total commercial business
20,511

 
16,359

 
22,834

 
17,707

One-to-four family residential
3,056

 
3,217

 
3,169

 
3,315

Real estate construction and land development:
 
 
 
 
 
 
 
One-to-four family residential

 
326

 
67

 
380

Five or more family residential and commercial properties
182

 
154

 
188

 
43

Total real estate construction and land development
182

 
480

 
255

 
423

Consumer
1,012

 
2,297

 
2,203

 
3,462

Gross PCI loans
$
24,761

 
$
22,353

 
$
28,461

 
$
24,907