LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES | LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES The following table presents the balances in the Company’s non-traditional mortgage (NTM) and traditional loans and leases portfolios as of the dates indicated: ($ in thousands) NTM Loans Traditional Loans and Leases Total Loans and Leases Receivable March 31, 2019 Commercial: Commercial and industrial $ — $ 1,907,102 $ 1,907,102 Commercial real estate — 865,521 865,521 Multifamily — 2,332,527 2,332,527 SBA — 74,998 74,998 Construction — 211,549 211,549 Consumer: Single family residential mortgage 788,054 1,314,640 2,102,694 Other consumer 2,351 60,458 62,809 Total loans and leases (1) $ 790,405 $ 6,766,795 $ 7,557,200 Percentage to total loans and leases 10.5 % 89.5 % 100.0 % Allowance for loan and lease losses (63,885 ) Loans and leases receivable, net $ 7,493,315 December 31, 2018 Commercial: Commercial and industrial $ — $ 1,944,142 $ 1,944,142 Commercial real estate — 867,013 867,013 Multifamily — 2,241,246 2,241,246 SBA — 68,741 68,741 Construction — 203,976 203,976 Consumer: Single family residential mortgage 824,318 1,481,172 2,305,490 Other consumer 2,413 67,852 70,265 Total loans and leases (1) $ 826,731 $ 6,874,142 $ 7,700,873 Percentage to total loans and leases 10.7 % 89.3 % 100.0 % Allowance for loan and lease losses (62,192 ) Loans and leases receivable, net $ 7,638,681 (1) Total loans and leases includes deferred loan origination costs/(fees) and premiums/(discounts), net of $16.8 million and $17.7 million , respectively, at March 31, 2019 and December 31, 2018 . Non-Traditional Mortgage Loans The Company’s NTM portfolio is comprised of three interest only products: Green Loans, Interest Only loans and a small number of additional loans with the potential for negative amortization. The following table presents the composition of the NTM portfolio as of the dates indicated: March 31, 2019 December 31, 2018 ($ in thousands) Count Amount Percent Count Amount Percent Green Loans (HELOC) - first liens 83 $ 64,444 8.2 % 88 $ 67,729 8.2 % Interest-only - first liens 477 720,116 91.1 % 519 753,061 91.1 % Negative amortization 11 3,494 0.4 % 11 3,528 0.4 % Total NTM - first liens 571 788,054 99.7 % 618 824,318 99.7 % Green Loans (HELOC) - second liens 8 2,351 0.3 % 10 2,413 0.3 % Total NTM - second liens 8 2,351 0.3 % 10 2,413 0.3 % Total NTM loans 579 $ 790,405 100.0 % 628 $ 826,731 100.0 % Total loans and leases $ 7,557,200 $ 7,700,873 % of total NTM loans to total loans and leases 10.5 % 10.7 % Green Loans Green Loans are single family residential first and second mortgage lines of credit with a linked checking account that allows all types of deposits and withdrawals to be performed. These loans are generally interest only for a 15 -year term with a balloon payment due at maturity. At March 31, 2019 and December 31, 2018 , $292 thousand and $0 , respectively, of the Company's Green Loans were non-performing. As a result of their unique payment feature, Green Loans possess higher credit risk due to the potential for negative amortization; however, management believes the risk is mitigated through the Company’s loan terms and underwriting standards, including its policies on LTV ratios and the Company’s contractual ability to curtail loans when the value of the underlying collateral declines. The Company discontinued origination of Green Loans in 2011. Interest Only Loans Interest only loans are primarily single family residential first mortgage loans with payment features that allow interest only payments in initial periods before converting to a fully amortizing loan. At March 31, 2019 and December 31, 2018 , Interest Only loans totaled $720.1 million and $753.1 million , respectively. At March 31, 2019 and December 31, 2018 , none of the Interest Only loans were non-performing. Loans with the Potential for Negative Amortization Negative amortization loans totaled $3.5 million and $3.5 million at March 31, 2019 and December 31, 2018 , respectively. The Company discontinued origination of negative amortization loans in 2007. At March 31, 2019 and December 31, 2018 , none of the loans with the potential for negative amortization were non-performing. These loans pose a potentially higher credit risk because of the lack of principal amortization and potential for negative amortization; however, management believes the credit risk associated with these loans is mitigated through the loan terms and underwriting standards, including the Company’s policies on LTV ratios. Allowance for Loan and Lease Losses The Company has established credit risk management processes that include regular management review of the loan and lease portfolio to identify problem loans and leases. During the ordinary course of business, management may become aware of borrowers and lessees who may not be able to fulfill the contractual payment requirements of the loan and lease agreements. Such loans and leases are subject to increased monitoring. Consideration is given to placing the loan or lease on non-accrual status, assessing the need for additional ALLL, and partial or full charge off the principal balance. The Company maintains the ALLL at a level that is considered adequate to cover the estimated incurred losses in the loan and lease portfolio. The Company also maintains a separate reserve for unfunded loan commitments at a level that is considered adequate to cover the estimated incurred loss. The estimated funding of the loan commitments and credit risk factors are determined based on outstanding loans that share similar credit risk exposure are used to determine the adequacy of the reserve. At March 31, 2019 and December 31, 2018 , the reserve for unfunded loan commitments was $4.2 million and $4.6 million , respectively, which are included in Accrued Expenses and Other Liabilities on the Consolidated Statements of Financial Condition. The credit risk monitoring system is designed to identify impaired and potential problem loans, and to perform periodic evaluation of impairment and the adequacy of the allowance for credit losses in a timely manner. In addition, the Board of Directors of the Bank has adopted a credit policy that includes a credit review and control system that it believes should be effective in ensuring that the Company maintains an adequate allowance for loan and lease losses. The Board of Directors also provides oversight and guidance for management’s allowance evaluation process. The following table presents a summary of activity in the ALLL for the periods indicated: Three Months Ended March 31, ($ in thousands) 2019 2018 Balance at beginning of period $ 62,192 $ 49,333 Loans and leases charged off (1,063 ) (14,639 ) Recoveries of loans and leases previously charged off 244 570 Provision for loan and lease losses 2,512 19,499 Balance at end of period $ 63,885 $ 54,763 During the three months ended March 31, 2018, the Company recorded a charge-off of $13.9 million , which reflected the outstanding balance under a $15.0 million line of credit that was originated during the three months ended March 31, 2018. Subsequent to the granting of the line of credit, representations from the borrower in applying for the line of credit were determined by the Bank to be false, and third party bank account statements provided by the borrower to secure the line of credit were found to be fraudulent. The line of credit was granted after the borrower appeared to have satisfied a pre-condition that the line of credit be fully cash collateralized and secured by a bank account at a third party financial institution pledged to the Bank. As part of the Bank’s credit review and portfolio management process, the line of credit and disbursements were reviewed subsequent to closing and compliance with the borrower’s covenants was monitored. As part of this process, on March 9, 2018, the Bank received information that caused it to believe the existence of the pledged bank account had been misrepresented by the borrower and that the account had previously been closed. The Bank filed an action in federal court pursuing the borrower and other parties and is also considering other available sources of collection and other potential means of mitigating the loss; however, no assurance can be given that it will be successful in this regard. Upon extensive review of the underwriting process for this loan, the Bank determined that this loan was the result of an isolated event of external fraud. The following table presents the activity and balance in the ALLL and the recorded investment, excluding accrued interest, in loans and leases based on the impairment methodology as of or for the three months ended March 31, 2019 : ($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Lease Financing Single Family Residential Mortgage Other Consumer Total ALLL: Balance at December 31, 2018 $ 18,191 $ 6,674 $ 17,970 $ 1,827 $ 3,461 $ — $ 13,128 $ 941 $ 62,192 Charge-offs (93 ) — — (356 ) — — (526 ) (88 ) (1,063 ) Recoveries 33 — — 41 — 3 150 17 244 Provision (reversal) 762 164 928 1,545 (8 ) (3 ) (610 ) (266 ) 2,512 Balance at March 31, 2019 $ 18,893 $ 6,838 $ 18,898 $ 3,057 $ 3,453 $ — $ 12,142 $ 604 $ 63,885 Individually evaluated for impairment $ 48 $ — $ — $ 1,634 $ — $ — $ 230 $ 33 $ 1,945 Collectively evaluated for impairment 18,845 6,838 18,898 1,423 3,453 — 11,912 571 61,940 Total ending ALLL balance $ 18,893 $ 6,838 $ 18,898 $ 3,057 $ 3,453 $ — $ 12,142 $ 604 $ 63,885 Loans: Individually evaluated for impairment $ 4,861 $ 573 $ — $ 3,808 $ 2,519 $ — $ 20,362 $ 841 $ 32,964 Collectively evaluated for impairment 1,902,241 864,948 2,332,527 71,190 209,030 — 2,082,332 61,968 7,524,236 Total ending loan balances $ 1,907,102 $ 865,521 $ 2,332,527 $ 74,998 $ 211,549 $ — $ 2,102,694 $ 62,809 $ 7,557,200 The following table presents the activity and balance in the ALLL and the recorded investment, excluding accrued interest, in loans and leases based on the impairment methodology as of or for the three months ended March 31, 2018 : ($ in thousands) Commercial and Industrial Commercial Real Estate Multifamily SBA Construction Lease Financing Single Family Residential Mortgage Other Consumer Total ALLL: Balance at December 31, 2017 $ 14,280 $ 4,971 $ 13,265 $ 1,701 $ 3,318 $ — $ 10,996 $ 802 $ 49,333 Charge-offs (71 ) — — (381 ) — — (115 ) (14,072 ) (14,639 ) Recoveries 61 — — 65 — 4 436 4 570 Provision (reversal) 3,301 446 954 192 (98 ) (4 ) 652 14,056 19,499 Balance at March 31, 2018 $ 17,571 $ 5,417 $ 14,219 $ 1,577 $ 3,220 $ — $ 11,969 $ 790 $ 54,763 Individually evaluated for impairment $ 1,115 $ — $ — $ 124 $ — $ — $ 420 $ 21 $ 1,680 Collectively evaluated for impairment 16,456 5,417 14,219 1,453 3,220 — 11,549 769 53,083 Total ending ALLL balance $ 17,571 $ 5,417 $ 14,219 $ 1,577 $ 3,220 $ — $ 11,969 $ 790 $ 54,763 Loans: Individually evaluated for impairment $ 5,265 $ — $ — $ 359 $ — $ — $ 19,667 $ 766 $ 26,057 Collectively evaluated for impairment 1,633,294 773,193 1,944,082 78,663 200,766 3 2,181,691 92,758 6,904,450 Total ending loan balances $ 1,638,559 $ 773,193 $ 1,944,082 $ 79,022 $ 200,766 $ 3 $ 2,201,358 $ 93,524 $ 6,930,507 The following table presents loans and leases individually evaluated for impairment by class of loans and leases as of the dates indicated. The recorded investment, excluding accrued interest, presents customer balances net of any partial charge-offs recognized on the loans and leases and net of any deferred fees and costs and any purchase premium or discount. March 31, 2019 December 31, 2018 ($ in thousands) Unpaid Principal Balance Recorded Investment Allowance for Loan and Lease Losses Unpaid Principal Balance Recorded Investment Allowance for Loan and Lease Losses With no related ALLL recorded: Commercial: Commercial and industrial $ 4,849 $ 4,813 $ — $ 5,491 $ 5,455 $ — Commercial real estate 572 573 — — — — SBA 1,475 1,409 — 1,668 1,588 — Construction 2,519 2,519 — — — — Consumer: Single family residential mortgage 8,788 8,802 — 12,115 12,161 — Other consumer 469 469 — 469 469 — With an ALLL recorded: Commercial: Commercial and industrial 48 48 48 — — — SBA 2,499 2,399 1,634 823 788 562 Consumer: Single family residential mortgage 11,496 11,560 230 5,993 6,032 161 Other consumer 390 372 33 468 452 106 Total $ 33,105 $ 32,964 $ 1,945 $ 27,027 $ 26,945 $ 829 The following table presents information on impaired loans and leases, disaggregated by class, for the periods indicated: Three Months Ended ($ in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Interest Recognized March 31, 2019 Commercial: Commercial and industrial $ 5,048 $ — $ — Commercial real estate 577 — — SBA 3,845 4 4 Construction 2,519 — — Consumer: Single family residential mortgage 19,323 58 49 Other consumer 844 3 3 Total $ 32,156 $ 65 $ 56 March 31, 2018 Commercial: Commercial and industrial $ 5,333 $ 3 $ 3 SBA 373 — — Consumer: Single family residential mortgage 19,715 57 49 Other consumer 749 3 2 Total $ 26,170 $ 63 $ 54 Past Due Loans and Leases The following table presents the aging of the recorded investment in past due loans and leases, excluding accrued interest receivable (which is not considered to be material), by class of loans and leases as of dates indicated: ($ in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due Greater than 89 Days Past due Total Past Due Current Total March 31, 2019 NTM loans: Single family residential mortgage $ 13,162 $ — $ 292 $ 13,454 $ 774,600 $ 788,054 Other consumer — — — — 2,351 2,351 Total NTM loans 13,162 — 292 13,454 776,951 790,405 Traditional loans and leases: Commercial: Commercial and industrial 1,702 1,759 3,386 6,847 1,900,255 1,907,102 Commercial real estate — 7,286 573 7,859 857,662 865,521 Multifamily — — — — 2,332,527 2,332,527 SBA 766 1,052 798 2,616 72,382 74,998 Construction 667 — 2,519 3,186 208,363 211,549 Consumer: Single family residential mortgage 15,687 930 6,683 23,300 1,291,340 1,314,640 Other consumer 1,826 3 372 2,201 58,257 60,458 Total traditional loans and leases 20,648 11,030 14,331 46,009 6,720,786 6,766,795 Total $ 33,810 $ 11,030 $ 14,623 $ 59,463 $ 7,497,737 $ 7,557,200 December 31, 2018 NTM loans: Single family residential mortgage $ 7,430 $ 617 $ — $ 8,047 $ 816,271 $ 824,318 Other consumer — — — — 2,413 2,413 Total NTM loans 7,430 617 — 8,047 818,684 826,731 Traditional loans and leases: Commercial: Commercial and industrial 350 1,596 3,340 5,286 1,938,856 1,944,142 Commercial real estate — 582 — 582 866,431 867,013 Multifamily 356 — — 356 2,240,890 2,241,246 SBA 551 77 862 1,490 67,251 68,741 Construction — 939 — 939 203,037 203,976 Consumer: Single family residential mortgage 7,321 3,160 9,198 19,679 1,461,493 1,481,172 Other consumer 3,132 573 446 4,151 63,701 67,852 Total traditional loans and leases 11,710 6,927 13,846 32,483 6,841,659 6,874,142 Total $ 19,140 $ 7,544 $ 13,846 $ 40,530 $ 7,660,343 $ 7,700,873 Non-accrual Loans and Leases The following table presents non-accrual loans and leases as of the dates indicated: March 31, 2019 December 31, 2018 ($ in thousands) NTM Loans Traditional Loans and Leases Total NTM Loans Traditional Loans and Leases Total Non-accrual loans and leases Commercial: Commercial and industrial $ — $ 4,859 $ 4,859 $ — $ 5,455 $ 5,455 Commercial real estate — 573 573 — — — SBA — 3,971 3,971 — 2,574 2,574 Construction — 2,519 2,519 — — — Consumer: Single family residential mortgage 292 14,978 15,270 — 12,929 12,929 Other consumer — 547 547 — 627 627 Total non-accrual loans and leases $ 292 $ 27,447 $ 27,739 $ — $ 21,585 $ 21,585 At March 31, 2019 and December 31, 2018 , $731 thousand and $470 thousand of loans were past due 90 days or more and still accruing. Loans in Process of Foreclosure At March 31, 2019 and December 31, 2018 , consumer mortgage loans of $4.0 million and $5.1 million , respectively, were secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction. Troubled Debt Restructurings A modification of a loan constitutes a troubled debt restructuring (TDR) when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. The concessions may be granted in various forms, including reduction in the stated interest rate, reduction in the amount of principal amortization, forgiveness of a portion of the loan balance or accrued interest, or extension of the maturity date. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. Troubled debt restructured loans and leases consisted of the following as of the dates indicated: March 31, 2019 December 31, 2018 ($ in thousands) NTM Loans Traditional Loans Total NTM Loans Traditional Loans Total Commercial: Commercial and industrial $ — $ 1,943 $ 1,943 $ — $ 2,276 $ 2,276 SBA — 187 187 — 187 187 Consumer: Single family residential mortgage 2,660 2,433 5,093 2,668 2,596 5,264 Other consumer 294 — 294 294 — 294 Total $ 2,954 $ 4,563 $ 7,517 $ 2,962 $ 5,059 $ 8,021 The Company did not have any commitments to lend to customers with outstanding loans that were classified as TDRs as of March 31, 2019 or December 31, 2018 . Accruing TDRs were $5.6 million and non-accrual TDRs were $1.9 million at March 31, 2019 compared to accruing TDRs of $5.7 million and non-accrual TDRs of $2.3 million at December 31, 2018 . The following table summarizes the pre-modification and post-modification balances of the new TDRs for the periods indicated: Three Months Ended ($ in thousands) Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment March 31, 2019 Total — $ — $ — March 31, 2018 Commercial: Commercial and industrial 2 $ 171 $ 163 Total 2 $ 171 $ 163 The Company considers a TDR to be in payment default once it becomes 30 days or more past due following a modification. During the three months ended March 31, 2019 and 2018 , there were no loans and leases that were modified as TDRs during the past 12 months that had subsequent payment defaults during the periods. The following table summarizes TDRs by modification type for the periods indicated: Three Months Ended Modification Type Change in Principal Payments and Interest Rates Change in Principal Payments Total ($ in thousands) Count Amount Count Amount Count Amount March 31, 2019 Commercial: Commercial and industrial — $ — — $ — — $ — Total — $ — — $ — — $ — March 31, 2018 Commercial: Commercial and industrial — $ — 2 $ 163 2 $ 163 Total — $ — 2 $ 163 2 $ 163 Credit Quality Indicators The Company categorizes loans and leases 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, public information, and current economic trends, among other factors. The Company performs historical loss analysis that is combined with a comprehensive loan or lease to value analysis to analyze the associated risks in the current loan and lease portfolio. The Company analyzes loans and leases individually by classifying the loans and leases as to credit risk. This analysis includes all loans and leases delinquent over 60 days and non-homogeneous loans and leases such as commercial and commercial real estate loans and leases. The Company uses the following definitions for risk ratings: Pass : Loans and leases classified as pass are in compliance in all respects with the Bank’s credit policy and regulatory requirements, and do not exhibit any potential or defined weakness as defined under “Special Mention”, “Substandard” or “Doubtful”. Special Mention : Loans and leases 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 lease or of the Company’s credit position at some future date. Substandard : Loans and leases classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans and leases 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 and leases 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. The following table presents the risk categories for total loans and leases as of the dates indicated: ($ in thousands) Pass Special Mention Substandard Doubtful Total March 31, 2019 NTM loans: Single family residential mortgage $ 772,205 $ 13,554 $ 2,295 $ — $ 788,054 Other consumer 2,351 — — — 2,351 Total NTM loans 774,556 13,554 2,295 — 790,405 Traditional loans and leases: Commercial: Commercial and industrial 1,806,891 43,511 56,700 — 1,907,102 Commercial real estate 847,213 13,741 4,567 — 865,521 Multifamily 2,329,615 — 2,912 — 2,332,527 SBA 60,082 4,316 9,798 802 74,998 Construction 201,254 5,105 5,190 — 211,549 Consumer: Single family residential mortgage 1,289,042 6,554 18,527 517 1,314,640 Other consumer 58,910 980 568 — 60,458 Total traditional loans and leases 6,593,007 74,207 98,262 1,319 6,766,795 Total $ 7,367,563 $ 87,761 $ 100,557 $ 1,319 $ 7,557,200 December 31, 2018 NTM loans: Single family residential mortgage $ 811,056 $ 10,966 $ 2,296 $ — $ 824,318 Other consumer 2,413 — — — 2,413 Total NTM loans 813,469 10,966 2,296 — 826,731 Traditional loans and leases: Commercial: Commercial and industrial 1,859,569 41,302 43,271 — 1,944,142 Commercial real estate 851,604 11,376 4,033 — 867,013 Multifamily 2,239,301 — 1,945 — 2,241,246 SBA 53,433 6,114 8,340 854 68,741 Construction 197,851 3,606 2,519 — 203,976 Consumer: Single family residential mortgage 1,461,721 2,602 16,849 — 1,481,172 Other consumer 66,228 979 645 — 67,852 Total traditional loans and leases 6,729,707 65,979 77,602 854 6,874,142 Total $ 7,543,176 $ 76,945 $ 79,898 $ 854 $ 7,700,873 Purchases, Sales, and Transfers From time to time, the Company purchases and sells loans in the secondary market. Certain loans are transferred from held-for-investment to held-for-sale at the lower of cost or fair value and any reductions in value on transfer are reflected as write-downs to allowance for loan losses. The Company had no purchases of loans and leases, excluding loans held-for-sale, for the three months ended March 31, 2019 and 2018 . The following table presents loans and leases transferred from (to) loans held-for-sale by portfolio segment for the periods indicated: Three Months Ended March 31, 2019 2018 ($ in thousands) Transfers from Held-For-Sale Transfers (to) Held-For-Sale Transfers from Held-For-Sale Transfers (to) Held-For-Sale Consumer: Single family residential mortgage $ — $ (243,364 ) $ — $ (2,184 ) Other consumer — — — (4,362 ) Total $ — $ (243,364 ) $ — $ (6,546 ) During the quarter, the Company sold $243.4 million in single family residential loans, resulting in a gain of $1.6 million . |