Loans Receivable, Net

The Company’s loan portfolio is comprised of three segments: residential real estate, commercial, and consumer and other loans. The loan segments are further disaggregated into the following classes: residential real estate, commercial real estate, other commercial, home equity and other consumer loans. The following table presents loans receivable for each portfolio class of loans:



	At or for the Years ended
(Dollars in thousands)	December 31, 2018			December 31, 2017
Residential real estate loans	$	887,742		720,728
Commercial loans
Real estate	4,657,561			3,577,139
Other commercial	1,911,171			1,579,353
Total	6,568,732			5,156,492
Consumer and other loans
Home equity	544,688			457,918
Other consumer	286,387			242,686
Total	831,075			700,604
Loans receivable	8,287,549			6,577,824
Allowance for loan and lease losses	(131,239		)	(129,568	)
Loans receivable, net	$	8,156,310		6,448,256
Net deferred origination (fees) costs included in loans receivable	$	(5,685	)	(2,643	)
Net purchase accounting (discounts) premiums included in loans receivable	$	(25,172	)	(16,325	)
Weighted-average interest rate on loans (tax-equivalent)	4.97		%	4.81	%

Note 3. Loans Receivable, Net (continued)

At December 31, 2018, the Company had $5,181,912,000 in variable rate loans and $3,105,637,000 in fixed rate loans. At December 31, 2018, the Company had loans of $4,483,373,000 pledged as collateral for FHLB advances and FRB discount window. The Company is subject to regulatory limits for the amount of loans to any individual borrower and the Company is in compliance with this regulation as of December 31, 2018 and 2017. No borrower had outstanding loans or commitments exceeding 10 percent of the Company’s consolidated stockholders’ equity as of December 31, 2018.

Loans that are serviced for others are not reported as assets. The principal balances of these loans were $181,281,000 and $4,042,000 at December 31, 2018 and 2017, respectively, with the increase almost entirely due to loans serviced for others assumed with the FSB acquisition. The fair value of servicing rights was insignificant at December 31, 2018 and 2017. There were no significant purchases or sales of portfolio loans during 2018, 2017 and 2016.

The Company has entered into transactions with its executive officers and directors and their affiliates. The aggregate amount of loans outstanding to such related parties at December 31, 2018 and 2017 was $59,528,000 and $82,350,000, respectively. During 2018, new loans to such related parties were $17,830,000, repayments were $38,276,000 and the effect of changes in composition of related parties was $(2,376,000). In management’s opinion, such loans were made in the ordinary course of business and were made on substantially the same terms as those prevailing at the time for comparable transaction with other persons.

Allowance for Loan and Lease Losses

The ALLL is a valuation allowance for probable incurred credit losses. The following tables summarize the activity in the ALLL by loan class:



	Year ended December 31, 2018
(Dollars in thousands)	Total			Residential Real Estate		Commercial Real Estate		Other Commercial		Home Equity		Other Consumer
Balance at beginning of period	$	129,568		10,798		68,515		39,303		6,204		4,748
Provision for loan losses	9,953			474		4,343		1,916		(471	)	3,691
Charge-offs	(17,807		)	(728	)	(3,469	)	(5,045	)	(210	)	(8,355	)
Recoveries	9,525			87		3,059		1,986		288		4,105
Balance at end of period	$	131,239		10,631		72,448		38,160		5,811		4,189



	Year ended December 31, 2017
(Dollars in thousands)	Total			Residential Real Estate		Commercial Real Estate		Other Commercial		Home Equity		Other Consumer
Balance at beginning of period	$	129,572		12,436		65,773		37,823		7,572		5,968
Provision for loan losses	10,824			(1,521	)	7,152		2,545		(1,103	)	3,751
Charge-offs	(19,331		)	(199	)	(6,188	)	(2,856	)	(489	)	(9,599	)
Recoveries	8,503			82		1,778		1,791		224		4,628
Balance at end of period	$	129,568		10,798		68,515		39,303		6,204		4,748



	Year ended December 31, 2016
(Dollars in thousands)	Total			Residential Real Estate		Commercial Real Estate		Other Commercial		Home Equity		Other Consumer
Balance at beginning of period	$	129,697		14,427		67,877		32,525		8,998		5,870
Provision for loan losses	2,333			(1,734	)	(2,686	)	5,164		(520	)	2,109
Charge-offs	(11,496		)	(464	)	(3,082	)	(1,778	)	(1,185	)	(4,987	)
Recoveries	9,038			207		3,664		1,912		279		2,976
Balance at end of period	$	129,572		12,436		65,773		37,823		7,572		5,968

Note 3. Loans Receivable, Net (continued)

The following tables disclose the recorded investment in loans and the balance in the ALLL by loan class:



	December 31, 2018
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
Loans receivable
Individually evaluated for impairment	$	108,788	12,685	68,837	20,975	3,497	2,794
Collectively evaluated for impairment	8,178,761		875,057	4,588,724	1,890,196	541,191	283,593
Total loans receivable	$	8,287,549	887,742	4,657,561	1,911,171	544,688	286,387
ALLL
Individually evaluated for impairment	$	3,223	83	568	2,313	39	220
Collectively evaluated for impairment	128,016		10,548	71,880	35,847	5,772	3,969
Total ALLL	$	131,239	10,631	72,448	38,160	5,811	4,189



	December 31, 2017
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
Loans receivable
Individually evaluated for impairment	$	119,994	12,399	77,536	23,032	3,755	3,272
Collectively evaluated for impairment	6,457,830		708,329	3,499,603	1,556,321	454,163	239,414
Total loans receivable	$	6,577,824	720,728	3,577,139	1,579,353	457,918	242,686
ALLL
Individually evaluated for impairment	$	5,223	246	500	3,851	56	570
Collectively evaluated for impairment	124,345		10,552	68,015	35,452	6,148	4,178
Total ALLL	$	129,568	10,798	68,515	39,303	6,204	4,748

Substantially all of the Company’s loans receivable are with customers in the Company’s geographic market areas. Although the Company has a diversified loan portfolio, a substantial portion of its customers’ ability to honor their obligations is dependent upon the economic performance in the Company’s market areas.

Aging Analysis

The following tables present an aging analysis of the recorded investment in loans by loan class:



	December 31, 2018
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
Accruing loans 30-59 days past due	$	24,312	5,251	9,477	4,282	3,213	2,089
Accruing loans 60-89 days past due	9,255		860	3,231	3,838	735	591
Accruing loans 90 days or more past due	2,018		788	—	492	428	310
Non-accrual loans	47,252		8,021	27,264	8,619	2,575	773
Total past due and non-accrual loans	82,837		14,920	39,972	17,231	6,951	3,763
Current loans receivable	8,204,712		872,822	4,617,589	1,893,940	537,737	282,624
Total loans receivable	$	8,287,549	887,742	4,657,561	1,911,171	544,688	286,387

Note 3. Loans Receivable, Net (continued)



	December 31, 2017
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
Accruing loans 30-59 days past due	$	26,375	6,252	12,546	3,634	2,142	1,801
Accruing loans 60-89 days past due	11,312		794	5,367	3,502	987	662
Accruing loans 90 days or more past due	6,077		2,366	609	2,973	—	129
Non-accrual loans	44,833		4,924	27,331	8,298	3,338	942
Total past due and non-accrual loans	88,597		14,336	45,853	18,407	6,467	3,534
Current loans receivable	6,489,227		706,392	3,531,286	1,560,946	451,451	239,152
Total loans receivable	$	6,577,824	720,728	3,577,139	1,579,353	457,918	242,686

Interest income that would have been recorded on non-accrual loans if such loans had been current for the entire period would have been approximately $2,340,000, $2,162,000, and $2,364,000 for the years ended December 31, 2018, 2017, and 2016, respectively.

Impaired Loans

Loans are designated impaired when, based upon 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 agreement and therefore, the Company has serious doubts as to the ability of such borrowers to fulfill the contractual obligation. The following tables disclose information related to impaired loans by loan class:



	At or for the Year ended December 31, 2018
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
Loans with a specific valuation allowance
Recorded balance	$	19,197	1,957	9,345	7,268	120	507
Unpaid principal balance	19,491		2,220	9,345	7,268	120	538
Specific valuation allowance	3,223		83	568	2,313	39	220
Average balance	19,519		2,686	8,498	7,081	82	1,172
Loans without a specific valuation allowance
Recorded balance	89,591		10,728	59,492	13,707	3,377	2,287
Unpaid principal balance	107,486		11,989	71,300	17,689	3,986	2,522
Average balance	106,747		10,269	73,889	17,376	3,465	1,748
Total
Recorded balance	108,788		12,685	68,837	20,975	3,497	2,794
Unpaid principal balance	126,977		14,209	80,645	24,957	4,106	3,060
Specific valuation allowance	3,223		83	568	2,313	39	220
Average balance	126,266		12,955	82,387	24,457	3,547	2,920

Note 3. Loans Receivable, Net (continued)



	At or for the Year ended December 31, 2017
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
Loans with a specific valuation allowance
Recorded balance	$	17,689	2,978	4,545	8,183	186	1,797
Unpaid principal balance	18,400		3,046	4,573	8,378	199	2,204
Specific valuation allowance	5,223		246	500	3,851	56	570
Average balance	18,986		2,928	5,851	8,477	359	1,371
Loans without a specific valuation allowance
Recorded balance	102,305		9,421	72,991	14,849	3,569	1,475
Unpaid principal balance	122,833		10,380	89,839	16,931	4,098	1,585
Average balance	107,945		9,834	76,427	15,129	4,734	1,821
Total
Recorded balance	119,994		12,399	77,536	23,032	3,755	3,272
Unpaid principal balance	141,233		13,426	94,412	25,309	4,297	3,789
Specific valuation allowance	5,223		246	500	3,851	56	570
Average balance	126,931		12,762	82,278	23,606	5,093	3,192

Interest income recognized on impaired loans for the years ended December 31, 2018, 2017, and 2016 was not significant.

Restructured Loans

A restructured loan is considered a troubled debt restructuring if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The following tables present TDRs that occurred during the periods presented and the TDRs that occurred within the previous twelve months that subsequently defaulted during the periods presented:



	Year ended December 31, 2018
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
TDRs that occurred during the period
Number of loans	25		4	8	10	2	1
Pre-modification recorded balance	$	21,995	724	12,901	7,813	252	305
Post-modification recorded balance	$	21,881	724	12,787	7,813	252	305
TDRs that subsequently defaulted
Number of loans	1		1	—	—	—	—
Recorded balance	$	47	47	—	—	—	—

Note 3. Loans Receivable, Net (continued)



	Year ended December 31, 2017
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
TDRs that occurred during the period
Number of loans	32		5	13	11	2	1
Pre-modification recorded balance	$	41,521	841	31,109	9,403	158	10
Post-modification recorded balance	$	38,838	841	28,426	9,403	158	10
TDRs that subsequently defaulted
Number of loans	1		—	—	1	—	—
Recorded balance	$	18	—	—	18	—	—



	Year ended December 31, 2016
(Dollars in thousands)	Total		Residential Real Estate	Commercial Real Estate	Other Commercial	Home Equity	Other Consumer
TDRs that occurred during the period
Number of loans	34		—	10	21	3	—
Pre-modification recorded balance	$	22,907	—	8,454	14,183	270	—
Post-modification recorded balance	$	22,848	—	8,415	14,166	267	—
TDRs that subsequently defaulted
Number of loans	1		—	—	1	—	—
Recorded balance	$	6	—	—	6	—	—

The modifications for the TDRs that occurred during the years ended December 31, 2018, 2017 and 2016 included one or a combination of the following: an extension of the maturity date, a reduction of the interest rate or a reduction in the principal amount.

In addition to the TDRs that occurred during the period provided in the preceding tables, the Company had TDRs with pre-modification loan balances of $6,793,000, $5,987,000 and $5,331,000 for the years ended December 31, 2018, 2017 and 2016, respectively, for which OREO was received in full or partial satisfaction of the loans. The majority of such TDRs were in commercial real estate for the years ended December 31, 2018 and 2017 and in residential real estate for the year ended December 31, 2016. At December 31, 2018 and 2017, the Company had $350,000 and $743,000, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At December 31, 2018 and 2017, the Company had $698,000 and $893,000, respectively, of OREO secured by residential real estate properties.

There were $5,335,000 and $1,960,000 of additional unfunded commitments on TDRs outstanding at December 31, 2018 and 2017, respectively. The amount of charge-offs on TDRs during 2018, 2017 and 2016 was $1,685,000, $2,984,000 and $557,000, respectively.