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Loans and Allowance for Loan and Lease Losses
3 Months Ended
Mar. 31, 2019
Receivables [Abstract]  
Loans and Allowance for Loan and Lease Losses Loans and Allowance for Loan and Lease Losses
Loans consisted of the following at the dates indicated (dollars in thousands):
 
March 31, 2019
 
December 31, 2018
 
Total
 
Percent of Total
 
Total
 
Percent of Total
Residential and other consumer:
 

 
 

 
 

 
 

1-4 single family residential
$
4,657,344

 
20.9
%
 
$
4,606,828

 
21.0
%
Government insured residential
312,312

 
1.4
%
 
265,701

 
1.2
%
Other
14,341

 
0.1
%
 
17,369

 
0.1
%
 
4,983,997

 
22.4
%
 
4,889,898

 
22.3
%
Commercial:
 
 
 
 
 
 
 
Multi-family
2,534,527

 
11.4
%
 
2,583,331

 
11.8
%
Non-owner occupied commercial real estate
4,817,629

 
21.5
%
 
4,700,188

 
21.4
%
Construction and land
213,634

 
1.0
%
 
227,134

 
1.0
%
Owner occupied commercial real estate
2,093,373

 
9.4
%
 
2,122,381

 
9.7
%
Commercial and industrial
5,039,938

 
22.5
%
 
4,801,226

 
21.9
%
Commercial lending subsidiaries
2,629,874

 
11.8
%
 
2,608,834

 
11.9
%
 
17,328,975

 
77.6
%
 
17,043,094

 
77.7
%
Total loans
22,312,972

 
100.0
%
 
21,932,992

 
100.0
%
Premiums, discounts and deferred fees and costs, net
45,845

 
 
 
44,016

 
 
Loans including premiums, discounts and deferred fees and costs
22,358,817

 
 
 
21,977,008

 
 
Allowance for loan and lease losses
(114,703
)
 
 
 
(109,931
)
 
 
Loans, net
$
22,244,114

 
 
 
$
21,867,077

 
 
 
Through two subsidiaries, the Bank provides commercial and municipal equipment and franchise financing utilizing both loan and lease structures. At March 31, 2019 and December 31, 2018, the commercial lending subsidiaries portfolio included a net investment in leases of $743 million and $739 million, respectively.
During the three months ended March 31, 2019 and 2018, the Company purchased 1-4 single family residential loans totaling $305 million and $333 million, respectively. Purchases for the three months ended March 31, 2019 and 2018 included $133 million and $39 million, respectively, of government insured residential loans.
At March 31, 2019, the Company had pledged real estate loans with UPB of approximately $10.0 billion and recorded investment of approximately $9.9 billion as security for FHLB advances.
The following presents the Company's recorded investment in ACI loans, included in the table above, as of the dates indicated (in thousands):
 
March 31, 2019
 
December 31, 2018
Residential
$
185,886

 
$
190,223

Commercial
17,781

 
17,925

 
$
203,667

 
$
208,148



At March 31, 2019 and December 31, 2018, the UPB of ACI loans was $390 million and $408 million, respectively. The accretable yield on ACI loans represents the amount by which undiscounted expected future cash flows exceed recorded investment. Changes in the accretable yield on ACI loans for the three months ended March 31, 2019 and the year ended December 31, 2018 were as follows (in thousands):
Balance at December 31, 2017
$
455,059

Reclassifications from non-accretable difference, net
128,499

Accretion
(369,915
)
Other changes, net (1)
78,204

Balance at December 31, 2018
291,847

Reclassifications from non-accretable difference, net
3,440

Accretion
(16,415
)
Balance at March 31, 2019
$
278,872

 
 
(1)
Represents changes in cash flows expected to be collected due to the impact of changes in prepayment assumptions.
Allowance for loan and lease losses 
Activity in the ALLL is summarized as follows for the periods indicated (thousands):
 
Three Months Ended March 31,
 
2019
 
2018
 
Residential and Other Consumer
 
Commercial
 
Total
 
Residential and Other Consumer
 
Commercial
 
Total
Beginning balance
$
10,788

 
$
99,143

 
$
109,931

 
$
10,720

 
$
134,075

 
$
144,795

Provision
150

 
10,131

 
10,281

 
374

 
2,773

 
3,147

Charge-offs

 
(6,133
)
 
(6,133
)
 
(282
)
 
(10,350
)
 
(10,632
)
Recoveries
14

 
610

 
624

 
20

 
146

 
166

Ending balance
$
10,952

 
$
103,751

 
$
114,703

 
$
10,832

 
$
126,644

 
$
137,476


The following table presents information about the balance of the ALLL and related loans at the dates indicated (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Residential and Other Consumer
 
Commercial
 
Total
 
Residential and Other Consumer
 
Commercial
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 

 
 

 
 

Ending balance
$
10,952

 
$
103,751

 
$
114,703

 
$
10,788

 
$
99,143

 
$
109,931

Ending balance: loans individually evaluated for impairment
$
9

 
$
13,667

 
$
13,676

 
$
134

 
$
12,143

 
$
12,277

Ending balance: loans collectively evaluated for impairment
$
10,943

 
$
90,084

 
$
101,027

 
$
10,654

 
$
87,000

 
$
97,654

Ending balance: ACI loans
$

 
$

 
$

 
$

 
$

 
$

Loans:
 
 
 
 
0

 
 
 
 
 
 
Ending balance
$
5,045,687

 
$
17,313,130

 
$
22,358,817

 
$
4,948,989

 
$
17,028,019

 
$
21,977,008

Ending balance: loans individually evaluated for impairment
$
10,891

 
$
122,442

 
$
133,333

 
$
7,690

 
$
108,841

 
$
116,531

Ending balance: loans collectively evaluated for impairment
$
4,848,910

 
$
17,172,907

 
$
22,021,817

 
$
4,751,076

 
$
16,901,253

 
$
21,652,329

Ending balance: ACI loans
$
185,886

 
$
17,781

 
$
203,667

 
$
190,223

 
$
17,925

 
$
208,148


Credit quality information
Loans, other than ACI loans and government insured residential loans, are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due, according to the contractual terms of the loan agreements. Commercial relationships with committed balances greater than or equal to $1.0 million that have internal risk ratings of substandard or doubtful and are on non-accrual status, as well as loans that have been modified in TDRs, are individually evaluated for impairment. Other commercial relationships on non-accrual status with committed balances under $1.0 million may also be evaluated individually for impairment at management's discretion. The likelihood of loss related to loans assigned internal risk ratings of substandard or doubtful is considered elevated due to their identified credit weaknesses. Factors considered by management in evaluating impairment include payment status, financial condition of the borrower, collateral value, and other factors impacting the probability of collecting scheduled principal and interest payments when due.
An ACI pool or loan is considered to be impaired when it is probable that the Company will be unable to collect all the cash flows expected at acquisition, plus additional cash flows expected to be collected arising from changes in estimates after acquisition. 1-4 single family residential and home equity ACI loans accounted for in pools are evaluated collectively for impairment on a pool by pool basis based on expected pool cash flows. Commercial ACI loans are individually evaluated for impairment based on expected cash flows from the individual loans. Discount continues to be accreted on ACI loans or pools as long as there are expected future cash flows in excess of the current carrying amount of the loans or pools.
The table below presents information about loans identified as impaired at the dates indicated (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Recorded
Investment
 
UPB
 
Related
Specific
Allowance
 
Recorded
Investment
 
UPB
 
Related
Specific
Allowance
With no specific allowance recorded:
 

 
 

 
 

 
 

 
 

 
 

1-4 single family residential (1)
$
10,338

 
$
10,193

 
$

 
$
5,724

 
$
5,605

 
$

Multi-family
25,298

 
25,329

 

 
25,560

 
25,592

 

Non-owner occupied commercial real estate
10,685

 
10,594

 

 
12,293

 
12,209

 

Construction and land
8,694

 
8,697

 

 
9,923

 
9,925

 

Owner occupied commercial real estate
10,691

 
10,729

 

 
9,007

 
9,024

 

Commercial and industrial 
11,740

 
11,750

 

 
13,514

 
13,519

 

Commercial lending subsidiaries
2,744

 
2,757

 

 
3,152

 
3,149

 

With a specific allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
1-4 single family residential (1)
553

 
541

 
9

 
1,966

 
1,941

 
134

Owner occupied commercial real estate

 

 

 
3,316

 
3,322

 
844

Non-owner occupied commercial real estate
12,411

 
12,399

 
2,165

 
1,666

 
1,667

 
731

Construction and land
1,096

 
1,096

 
110

 

 

 

Commercial and industrial
20,685

 
20,660

 
5,083

 
10,939

 
10,946

 
3,831

Commercial lending subsidiaries
18,398

 
18,311

 
6,309

 
19,471

 
19,385

 
6,737

Total:
 
 
 
 
 
 
 
 
 
 
 
Residential and other consumer
$
10,891

 
$
10,734

 
$
9

 
$
7,690

 
$
7,546

 
$
134

Commercial
122,442

 
122,322

 
13,667

 
108,841

 
108,738

 
12,143

 
$
133,333

 
$
133,056

 
$
13,676

 
$
116,531

 
$
116,284

 
$
12,277

 
 
(1)
Includes government insured residential loans modified in TDRs totaling $6.1 million and $3.5 million at March 31, 2019 and December 31, 2018, respectively.
Interest income recognized on impaired loans was immaterial for the three months ended March 31, 2019 and 2018.
The following table presents the average recorded investment in impaired loans for the periods indicated (in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
Residential and other consumer:
 

 
 
1-4 single family residential
$
9,291

 
$
4,596

Commercial:
 
 
 
Multi-family
25,429

 
24,720

Non-owner occupied commercial real estate
18,528

 
12,876

Construction and land
9,857

 
3,148

Owner occupied commercial real estate
11,507

 
21,599

Commercial and industrial
28,439

 
110,312

Commercial lending subsidiaries
21,883

 
2,126

 
115,643

 
174,781

 
$
124,934

 
$
179,377


The following table presents the recorded investment in loans on non-accrual status as of the dates indicated (in thousands):
 
March 31, 2019
 
December 31, 2018
Residential and other consumer:
 

 
 

1-4 single family residential
$
7,355

 
$
6,316

Other consumer loans
283

 
288

 
7,638

 
6,604

Commercial:
 
 
 
Multi-family
25,298

 
25,560

Non-owner occupied commercial real estate
25,459

 
16,050

Construction and land
9,790

 
9,923

Owner occupied commercial real estate
18,439

 
19,789

Commercial and industrial 
24,346

 
28,584

Commercial lending subsidiaries
22,224

 
22,733

 
125,556

 
122,639

 
$
133,194

 
$
129,243

Loans contractually delinquent by 90 days or more and still accruing totaled $0.7 million at December 31, 2018. There were no loans contractually delinquent by 90 days and still accruing at March 31, 2019. The amount of additional interest income that would have been recognized on non-accrual loans had they performed in accordance with their contractual terms was approximately $2.0 million and $1.4 million for the three months ended March 31, 2019 and 2018, respectively.
Management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential, home equity and consumer loans. Delinquency statistics are updated at least monthly. See "Aging of loans" below for more information on the delinquency status of loans. Original LTV and original FICO score are also important indicators of credit quality for 1-4 single family residential loans other than the FSB loans and government insured loans. 
Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Internal risk ratings are a key factor in identifying loans that are individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the ALLL. Internal risk ratings are updated on a continuous basis. Generally, relationships with balances in excess of defined thresholds, ranging from $1 million to $3 million, are re-evaluated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected may result in deterioration of the repayment capacity of the borrower are categorized as special mention. Loans with well-defined credit weaknesses, including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves, are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable, but because of certain reasonably specific pending factors has not been charged off, will be assigned an internal risk rating of doubtful. 
The following tables summarize key indicators of credit quality for the Company's loans at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (in thousands): 
1-4 Single Family Residential credit exposure for loans, excluding FSB loans and government insured residential loans, based on original LTV and FICO score: 
 
 
March 31, 2019
 
 
FICO
LTV
 
720 or less
 
721 - 740
 
741 - 760
 
761 or
greater
 
Total
60% or less
 
$
105,240

 
$
125,817

 
$
192,383

 
$
799,247

 
$
1,222,687

60% - 70%
 
124,602

 
109,812

 
171,155

 
607,402

 
1,012,971

70% - 80%
 
165,318

 
206,489

 
381,236

 
1,288,028

 
2,041,071

More than 80%
 
19,016

 
36,464

 
43,214

 
146,150

 
244,844

 
 
$
414,176

 
$
478,582

 
$
787,988

 
$
2,840,827

 
$
4,521,573

 
 
December 31, 2018
 
 
FICO
LTV
 
720 or less
 
721 - 740
 
741 - 760
 
761 or
greater
 
Total
60% or less
 
$
105,812

 
$
123,877

 
$
197,492

 
$
813,944

 
$
1,241,125

60% - 70%
 
120,982

 
109,207

 
170,531

 
597,659

 
998,379

70% - 80%
 
156,519

 
203,121

 
374,311

 
1,264,491

 
1,998,442

More than 80%
 
17,352

 
35,036

 
36,723

 
136,487

 
225,598

 
 
$
400,665

 
$
471,241

 
$
779,057

 
$
2,812,581

 
$
4,463,544

Commercial credit exposure, based on internal risk rating: 
 
March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Commercial Lending Subsidiaries
 
 
 
Multi-Family
 
Non-Owner Occupied Commercial Real Estate
 
Construction
and Land
 
Owner Occupied Commercial Real Estate
 
Commercial and Industrial
 
Pinnacle
 
Bridge
 
Total
Pass
$
2,502,332

 
$
4,734,775

 
$
203,619

 
$
2,034,437

 
$
4,944,693

 
$
1,450,317

 
$
1,128,649

 
$
16,998,822

Special mention

 
2,565

 

 
25,233

 
23,460

 

 
24,625

 
75,883

Substandard
34,256

 
69,068

 
9,790

 
30,844

 
57,393

 

 
27,819

 
229,170

Doubtful

 

 

 

 
2,950

 

 
6,305

 
9,255

 
$
2,536,588

 
$
4,806,408

 
$
213,409

 
$
2,090,514

 
$
5,028,496

 
$
1,450,317

 
$
1,187,398

 
$
17,313,130

 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Commercial Lending Subsidiaries
 
 
 
Multi-Family
 
Non-Owner Occupied Commercial Real Estate
 
Construction
and Land
 
Owner Occupied Commercial Real Estate
 
Commercial and Industrial
 
Pinnacle
 
Bridge
 
Total
Pass
$
2,547,835

 
$
4,611,029

 
$
216,917

 
$
2,077,611

 
$
4,706,666

 
$
1,462,655

 
$
1,105,821

 
$
16,728,534

Special mention
2,932

 
16,516

 

 
13,368

 
38,097

 

 
10,157

 
81,070

Substandard
34,654

 
61,335

 
9,923

 
28,901

 
43,691

 

 
31,522

 
210,026

Doubtful

 

 

 

 
1,746

 

 
6,643

 
8,389

 
$
2,585,421

 
$
4,688,880


$
226,840

 
$
2,119,880


$
4,790,200

 
$
1,462,655

 
$
1,154,143


$
17,028,019

Aging of loans:
The following table presents an aging of loans at the dates indicated. Amounts include premiums, discounts and deferred fees and costs (in thousands):
 
March 31, 2019
 
December 31, 2018
 
Current
 
30 - 59
Days Past
Due
 
60 - 89
Days Past
Due
 
90 Days or
More Past
Due
 
Total
 
Current
 
30 - 59
Days Past
Due
 
60 - 89
Days Past
Due
 
90 Days or
More Past
Due
 
Total
1-4 single family residential
$
4,527,777

 
$
175,741

 
$
7,983

 
$
6,552

 
$
4,718,053

 
$
4,640,771

 
$
15,070

 
$
2,126

 
$
6,953

 
$
4,664,920

Government insured residential
33,354

 
14,518

 
17,965

 
247,474

 
313,311

 
31,348

 
8,342

 
8,871

 
218,168

 
266,729

Home equity loans and lines of credit
1,405

 

 

 

 
1,405

 
1,393

 

 

 

 
1,393

Other consumer loans
10,913

 

 
2,005

 

 
12,918

 
15,947

 

 

 

 
15,947

Multi-family
2,536,588

 

 

 

 
2,536,588

 
2,585,421

 

 

 

 
2,585,421

Non-owner occupied commercial real estate
4,784,011

 
7,819

 
12,411

 
2,167

 
4,806,408

 
4,682,443

 
3,621

 
1,374

 
1,442

 
4,688,880

Construction and land
209,374

 
2,939

 

 
1,096

 
213,409

 
224,828

 
916

 

 
1,096

 
226,840

Owner occupied commercial real estate
2,078,379

 
2,834

 
1,881

 
7,420

 
2,090,514

 
2,106,104

 
2,826

 
1,087

 
9,863

 
2,119,880

Commercial and industrial
5,017,066

 
864

 
208

 
10,358

 
5,028,496

 
4,772,978

 
6,732

 
926

 
9,564

 
4,790,200

Commercial lending subsidiaries
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pinnacle
1,450,317

 

 

 

 
1,450,317

 
1,462,655

 

 

 

 
1,462,655

Bridge
1,183,944

 
3,384

 

 
70

 
1,187,398

 
1,152,312

 
603

 

 
1,228

 
1,154,143

 
$
21,833,128

 
$
208,099

 
$
42,453

 
$
275,137

 
$
22,358,817

 
$
21,676,200

 
$
38,110

 
$
14,384

 
$
248,314

 
$
21,977,008


Foreclosure of residential real estate
The carrying amount of foreclosed residential real estate included in "Other assets" in the accompanying consolidated balance sheets totaled $6 million at both March 31, 2019 and December 31, 2018. The recorded investment in non-government insured residential mortgage loans in the process of foreclosure was insignificant at March 31, 2019 and December 31, 2018. The recorded investment in government insured residential loans in the process of foreclosure totaled $125 million and $85 million at March 31, 2019 and December 31, 2018, respectively.
Troubled debt restructurings
The following table summarizes loans that were modified in TDRs during the periods indicated, as well as loans modified during the twelve months preceding March 31, 2019 and 2018 that experienced payment defaults during the periods indicated (dollars in thousands):
 
Three Months Ended March 31,
 
2019
 
2018
 
Loans Modified in TDRs 
During the Period
 
TDRs Experiencing Payment
Defaults During the Period
 
Loans Modified in TDRs 
During the Period
 
TDRs Experiencing Payment
Defaults During the Period
 
Number of
TDRs
 
Recorded
Investment
 
Number of
TDRs
 
Recorded
Investment
 
Number of
TDRs
 
Recorded
Investment
 
Number of
TDRs
 
Recorded
Investment
1-4 single family residential(1)
22

 
$
3,548

 
16

 
$
1,942

 
7

 
$
2,456

 
2

 
$
185

Non-owner occupied commercial real estate

 

 
1

 
2,874

 

 

 

 

Owner occupied commercial real estate
1

 
904

 
3

 
1,962

 

 

 

 

Commercial and industrial
3

 
12,720

 
1

 
143

 
5

 
1,204

 
11

 
3,610

Commercial lending subsidiaries
3

 
2,097

 

 

 

 

 

 

 
29

 
$
19,269

 
21

 
$
6,921

 
12

 
$
3,660

 
13

 
$
3,795

 
 
(1)
Includes government insured residential loans modified totaling $3 million and $0.1 million during the three months ended March 31, 2019 and 2018, respectively.
Modifications during the three months ended March 31, 2019 and 2018 included interest rate reductions, restructuring of the amount and timing of required periodic payments, extensions of maturity and covenant waivers. Included in TDRs are residential loans to borrowers who have not reaffirmed their debt discharged in Chapter 7 bankruptcy. The total amount of such loans is not material. Modified ACI loans accounted for in pools are not considered TDRs, are not separated from the pools and are not classified as impaired loans.