LOANS

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

LOANS

Note 3 – LOANS

Outstanding loan balances at September 30, 2019 and December 31, 2018 are net of unearned income, including net deferred loan fees of $1.4 million and $0.9 million, respectively. The loan portfolio segment balances at the dates indicated are presented in the following table:

(In thousands)		September 30, 2019		December 31, 2018
Residential real estate:
	Residential mortgage	$	1,199,275	$	1,228,247
	Residential construction		150,692		186,785
Commercial real estate:
	Commercial owner-occupied real estate		1,278,505		1,202,903
	Commercial investor real estate		2,036,021		1,958,395
	Commercial AD&C		678,906		681,201
Commercial business			772,619		796,264
Consumer			480,530		517,839
	Total loans	$	6,596,548	$	6,571,634

The fair value of the financial assets acquired in the Company’s acquisition of WashingtonFirst Bancshares, Inc. (“WashingtonFirst”) on January 1, 2018 included loans receivable with a gross amortized cost basis of $1.7 billion. The table below illustrates the fair value adjustments made to the amortized cost basis in order to present a fair value of the loans acquired. Interest and credit fair value adjustments related to loans acquired without evidence of credit quality deterioration are accreted or amortized into interest income over the remaining expected lives of the loans. The specific credit adjustment on acquired credit impaired loans includes accretable and non-accretable components. Of the $14.5 million specific credit mark on acquired credit impaired loans, approximately $4.0 million was estimated to be an accretable adjustment recognized over the remaining expected lives of the loans and $10.5 million was estimated to be non-accretable adjustment.

In conjunction with the WashingtonFirst acquisition, the acquired loan portfolio was accounted for at fair value as follows:

(Dollars in thousands)	January 1, 2018
Gross amortized cost basis at January 1, 2018	$	1,697,760
Interest rate fair value adjustment		15,370
Credit fair value adjustment on pools of homogeneous loans		(22,421)
Credit fair value adjustment on purchased credit impaired loans		(14,518)
Fair value of acquired loan portfolio at January 1, 2018	$	1,676,191

The following table presents the acquired credit impaired loans receivable as of January 1, 2018 (the “Acquisition Date”):

(Dollars in thousands)	January 1, 2018
Contractual principal and interest at acquisition	$	49,412
Contractual cash flows not expected to be collected (Nonaccretable yield)		(17,915)
Expected cash flows at acquisition		31,497
Interest component of expected cash flows (Accretable yield)		(3,988)
Fair value of purchased credit impaired loans	$	27,509

The outstanding balance of purchased credit impaired loans receivable totaled $41.9 million, $26.0 million and $12.9 million at January 1, 2018, December 31, 2018 and September 30, 2019, respectively. The fair value of purchased credit impaired loans was $9.6 million and $15.3 million at September 30, 2019 and December 31, 2018, respectively. The decrease in the outstanding amounts of purchased credit impaired loans receivable from the Acquisition Date through the current period was driven by efforts to resolve the most material credit deteriorated borrowers. During 2018, liquidation of collateral resulted in full pay-off of the outstanding principal balances of $12.4 million and the related release of accretable and non-accretable adjustments into interest income in the total amounts of $0.8 million and $1.3 million, respectively. During the current year to date, the Company settled additional purchased credit impaired loans with total outstanding balances of $5.8 million resulting in the related release of accretable and non-accretable adjustments into interest income in the total amounts of $0.2 million and $1.6 million, respectively.

Activity for the accretable yield since the Acquisition Date was as follows:

	For the Period Ended,
(Dollars in thousands)	September 30, 2019		December 31, 2018
Accretable yield at the beginning of the period	$	1,279	$	-
Addition of accretable yield due to acquisition		-		3,988
Accretion into interest income		(869)		(1,860)
Disposals (including maturities, foreclosures, and charge-offs)		(199)		(849)
Accretable yield at the end of the period.	$	211	$	1,279