Loans Receivable and Allowance for Loan Losses | Loans Receivable and Allowance for Loan Losses Loans receivable at September 30, 2017 and December 31, 2016 are summarized as follows (in thousands): September 30, 2017 December 31, 2016 Mortgage loans: Residential $ 1,157,311 1,211,672 Commercial 2,022,576 1,978,569 Multi-family 1,334,984 1,402,054 Construction 324,692 264,814 Total mortgage loans 4,839,563 4,857,109 Commercial loans 1,708,842 1,630,444 Consumer loans 481,262 516,755 Total gross loans 7,029,667 7,004,308 Purchased credit-impaired ("PCI") loans 991 1,272 Premiums on purchased loans 4,229 4,968 Unearned discounts (36 ) (39 ) Net deferred fees (6,799 ) (7,023 ) Total loans $ 7,028,052 7,003,486 The following tables summarize the aging of loans receivable by portfolio segment and class of loans, excluding PCI loans (in thousands): September 30, 2017 30-59 Days 60-89 Days Non-accrual Recorded Total Past Due Current Total Loans Receivable Mortgage loans: Residential $ 5,973 3,525 8,820 — 18,318 1,138,993 1,157,311 Commercial 608 292 8,070 — 8,970 2,013,606 2,022,576 Multi-family — — — — — 1,334,984 1,334,984 Construction — — — — — 324,692 324,692 Total mortgage loans 6,581 3,817 16,890 — 27,288 4,812,275 4,839,563 Commercial loans 1,870 244 17,523 — 19,637 1,689,205 1,708,842 Consumer loans 2,307 1,080 2,035 — 5,422 475,840 481,262 Total gross loans $ 10,758 5,141 36,448 — 52,347 6,977,320 7,029,667 December 31, 2016 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Receivable Mortgage loans: Residential $ 5,891 6,563 12,021 — 24,475 1,187,197 1,211,672 Commercial — 80 7,493 — 7,573 1,970,996 1,978,569 Multi-family — — 553 — 553 1,401,501 1,402,054 Construction — — 2,517 — 2,517 262,297 264,814 Total mortgage loans 5,891 6,643 22,584 — 35,118 4,821,991 4,857,109 Commercial loans 1,656 357 16,787 — 18,800 1,611,644 1,630,444 Consumer loans 2,561 1,199 3,030 — 6,790 509,965 516,755 Total gross loans $ 10,108 8,199 42,401 — 60,708 6,943,600 7,004,308 Included in loans receivable are loans for which the accrual of interest income has been discontinued due to deterioration in the financial condition of the borrowers. The principal amounts of these non-accrual loans were $36.4 million and $42.4 million at September 30, 2017 and December 31, 2016 , respectively. Included in non-accrual loans were $9.1 million and $7.3 million of loans which were less than 90 days past due at September 30, 2017 and December 31, 2016 , respectively. There were no loans 90 days or greater past due and still accruing interest at September 30, 2017 or December 31, 2016 . The Company defines an impaired loan as a non-homogeneous loan greater than $1.0 million for which it is probable, based on current information, all amounts due under the contractual terms of the loan agreement will not be collected. Impaired loans also include all loans modified as troubled debt restructurings (“TDRs”). A loan is deemed to be a TDR when a loan modification resulting in a concession is made in an effort to mitigate potential loss arising from a borrower’s financial difficulty. Smaller balance homogeneous loans, including residential mortgages and other consumer loans, are evaluated collectively for impairment and are excluded from the definition of impaired loans, unless modified as TDRs. The Company separately calculates the reserve for loan losses on impaired loans. The Company may recognize impairment of a loan based upon: (1) the present value of expected cash flows discounted at the effective interest rate; (2) if a loan is collateral dependent, the fair value of collateral; or (3) the fair value of the loan. Additionally, if impaired loans have risk characteristics in common, those loans may be aggregated and historical statistics may be used as a means of measuring those impaired loans. The Company uses third-party appraisals to determine the fair value of the underlying collateral in its analysis of collateral dependent impaired loans. A third-party appraisal is generally ordered as soon as a loan is designated as a collateral dependent impaired loan and is updated annually or more frequently, if required. A specific allocation of the allowance for loan losses is established for each collateral dependent impaired loan with a carrying balance greater than the collateral’s fair value, less estimated costs to sell. Charge-offs are generally taken for the amount of the specific allocation when operations associated with the respective property cease and it is determined that collection of amounts due will be derived primarily from the disposition of the collateral. At each quarter end, if a loan is designated as a collateral dependent impaired loan and the third-party appraisal has not yet been received, an evaluation of all available collateral is made using the best information available at the time, including rent rolls, borrower financial statements and tax returns, prior appraisals, management’s knowledge of the market and collateral, and internally prepared collateral valuations based upon market assumptions regarding vacancy and capitalization rates, each as and where applicable. Once the appraisal is received and reviewed, the specific reserves are adjusted to reflect the appraised value. The Company believes there have been no significant time lapses in the recognition of changes in collateral values as a result of this process. At September 30, 2017 , there were 145 impaired loans totaling $50.2 million . Included in this total were 126 TDRs related to 122 borrowers totaling $31.7 million that were performing in accordance with their restructured terms and which continued to accrue interest at September 30, 2017 . At December 31, 2016 , there were 141 impaired loans totaling $52.0 million . Included in this total were 114 TDRs to 110 borrowers totaling $29.9 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2016 . The following table summarizes loans receivable by portfolio segment and impairment method, excluding PCI loans (in thousands): September 30, 2017 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 28,578 19,393 2,210 50,181 Collectively evaluated for impairment 4,810,985 1,689,449 479,052 6,979,486 Total gross loans $ 4,839,563 1,708,842 481,262 7,029,667 December 31, 2016 Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Individually evaluated for impairment $ 29,551 20,255 2,213 52,019 Collectively evaluated for impairment 4,827,558 1,610,189 514,542 6,952,289 Total gross loans $ 4,857,109 1,630,444 516,755 7,004,308 The allowance for loan losses is summarized by portfolio segment and impairment classification as follows (in thousands): September 30, 2017 Mortgage loans Commercial loans Consumer loans Total Individually evaluated for impairment $ 1,773 1,028 71 2,872 Collectively evaluated for impairment 24,724 30,423 2,257 57,404 Total gross loans $ 26,497 31,451 2,328 60,276 December 31, 2016 Mortgage loans Commercial loans Consumer loans Total Individually evaluated for impairment $ 1,986 268 80 2,334 Collectively evaluated for impairment 27,640 28,875 3,034 59,549 Total gross loans $ 29,626 29,143 3,114 61,883 Loan modifications to borrowers experiencing financial difficulties that are considered TDRs primarily involve lowering the monthly payments on such loans through either a reduction in interest rate below a market rate, an extension of the term of the loan without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, the Company attempts to obtain additional collateral or guarantor support when modifying such loans. If the borrower has demonstrated performance under the previous terms and our underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The following tables present the number of loans modified as TDRs during the three and nine months ended September 30, 2017 and 2016 , along with their balances immediately prior to the modification date and post-modification as of September 30, 2017 and 2016 . There were no loans modified as TDRs during the three and nine months ended September 30, 2016 . For the three months ended September 30, 2017 September 30, 2016 Troubled Debt Restructurings Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment ($ in thousands) Mortgage loans: Residential 2 $ 632 $ 470 — $ — $ — Total mortgage loans 2 632 470 — — — Total restructured loans 2 $ 632 $ 470 — $ — $ — For the nine months ended September 30, 2017 September 30, 2016 Troubled Debt Restructurings Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification ($ in thousands) Mortgage loans: Residential 7 $ 3,436 $ 3,202 — $ — $ — Total mortgage loans 7 3,436 3,202 — — — Commercial loans 1 1,300 1,210 — — — Consumer loans 1 70 68 — — — Total restructured loans 9 $ 4,806 $ 4,480 — $ — $ — All TDRs are impaired loans, which are individually evaluated for impairment, as previously discussed. During the three and nine months ended September 30, 2017 , $3.2 million and $4.4 million of charge-offs were recorded on collateral dependent impaired loans. There were no charge-offs recorded on collateral dependent impaired loans for the same periods last year. For the three and nine months ended September 30, 2017 , the allowance for loan losses associated with the TDRs presented in the preceding tables totaled $0 and $120,000 , respectively, and were included in the allowance for loan losses for loans individually evaluated for impairment. For the three and nine months ended September 30, 2017 , the TDRs presented in the preceding tables had a weighted average modified interest rate of approximately 4.36% and 4.02% , respectively, compared to a weighted average rate of 4.33% and 3.93% prior to modification, respectively. There were no payment defaults (90 days or more past due) for loans modified as TDRs within the 12 month periods ending September 30, 2017 and 2016 . TDRs that subsequently default are considered collateral dependent impaired loans and are evaluated for impairment based on the estimated fair value of the underlying collateral less expected selling costs. PCI loans are loans acquired at a discount primarily due to deteriorated credit quality. As part of the May 30, 2014 acquisition of Team Capital, $5.2 million of the loans acquired were determined to be PCI loans. At the date of acquisition, PCI loans were accounted for at fair value, based upon the then present value of expected future cash flows, with no related allowance for loan losses. PCI loans totaled $1.0 million at September 30, 2017 and $1.3 million at December 31, 2016 . The following table summarizes the changes in the accretable yield for PCI loans during the three and nine months ended September 30, 2017 and 2016 (in thousands): Three months ended September 30, Nine months ended September 30, 2017 2016 2017 2016 Beginning balance $ 158 328 200 676 Accretion (154 ) (225 ) (299 ) (1,065 ) Reclassification from non-accretable discount 99 209 202 701 Ending balance $ 103 312 103 312 The activity in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2017 and 2016 was as follows (in thousands): Three months ended September 30, Mortgage loans Commercial loans Consumer loans Total Portfolio Segments Unallocated Total 2017 Balance at beginning of period $ 28,826 31,085 2,951 62,862 — 62,862 Provision charged (credited) to operations (2,301 ) 3,446 (645 ) 500 — 500 Recoveries of loans previously charged-off 4 140 291 435 — 435 Loans charged-off (32 ) (3,220 ) (269 ) (3,521 ) — (3,521 ) Balance at end of period $ 26,497 31,451 2,328 60,276 — 60,276 2016 Balance at beginning of period $ 31,634 26,299 3,000 60,933 — 60,933 Provision charged (credited) to operations (1,599 ) 2,378 221 1,000 — 1,000 Recoveries of loans previously charged-off 2 68 160 230 — 230 Loans charged-off (383 ) (506 ) (186 ) (1,075 ) — (1,075 ) Balance at end of period $ 29,654 28,239 3,195 61,088 — 61,088 Nine months ended September 30, Mortgage Commercial Consumer Total Portfolio Unallocated Total 2017 Balance at beginning of period $ 29,626 29,143 3,114 61,883 — 61,883 Provision charged (credited) to operations (2,724 ) 6,840 (416 ) 3,700 — 3,700 Recoveries of loans previously charged-off 65 671 692 1,428 — 1,428 Loans charged-off (470 ) (5,203 ) (1,062 ) (6,735 ) — (6,735 ) Balance at end of period $ 26,497 31,451 2,328 60,276 — 60,276 2016 Balance at beginning of period $ 32,094 25,829 3,501 61,424 — 61,424 Provision charged (credited) to operations (2,294 ) 6,647 (153 ) 4,200 — 4,200 Recoveries of loans previously charged-off 575 351 697 1,623 — 1,623 Loans charged-off (721 ) (4,588 ) (850 ) (6,159 ) — (6,159 ) Balance at end of period $ 29,654 28,239 3,195 61,088 — 61,088 The following table presents loans individually evaluated for impairment by class and loan category, excluding PCI loans (in thousands): September 30, 2017 December 31, 2016 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized Loans with no related allowance Mortgage loans: Residential $ 13,035 10,277 — 10,391 340 10,691 7,881 — 8,027 484 Commercial 4,600 4,472 — 4,496 — 1,556 1,556 — 1,586 40 Construction — — — — — 2,553 2,517 — 2,514 — Total 17,635 14,749 — 14,887 340 14,800 11,954 — 12,127 524 Commercial loans 17,505 13,884 — 13,954 280 21,830 18,874 — 13,818 259 Consumer loans 1,606 1,067 — 1,186 51 1,493 981 — 1,026 59 Total impaired loans $ 36,746 29,700 — 30,027 671 38,123 31,809 — 26,971 842 Loans with an allowance recorded Mortgage loans: Residential $ 13,803 12,759 1,633 12,873 374 14,169 13,520 1,716 13,705 519 Commercial 1,071 1,070 140 1,083 40 4,138 4,077 270 4,111 55 Construction — — — — — — — — — — Total 14,874 13,829 1,773 13,956 414 18,307 17,597 1,986 17,816 574 Commercial loans 6,158 5,509 1,028 6,045 52 1,381 1,381 268 5,956 4 Consumer loans 1,154 1,143 71 1,170 47 1,242 1,232 80 1,259 66 Total impaired loans $ 22,186 20,481 2,872 21,171 513 20,930 20,210 2,334 25,031 644 Total impaired loans Mortgage loans: Residential $ 26,838 23,036 1,633 23,264 714 24,860 21,401 1,716 21,732 1,003 Commercial 5,671 5,542 140 5,579 40 5,694 5,633 270 5,697 95 Construction — — — — — 2,553 2,517 — 2,514 — Total 32,509 28,578 1,773 28,843 754 33,107 29,551 1,986 29,943 1,098 Commercial loans 23,663 19,393 1,028 19,999 332 23,211 20,255 268 19,774 263 Consumer loans 2,760 2,210 71 2,356 98 2,735 2,213 80 2,285 125 Total impaired loans $ 58,932 50,181 2,872 51,198 1,184 59,053 52,019 2,334 52,002 1,486 Specific allocations of the allowance for loan losses attributable to impaired loans totaled $2.9 million at September 30, 2017 and $2.3 million at December 31, 2016 . At September 30, 2017 and December 31, 2016 , impaired loans for which there was no related allowance for loan losses totaled $29.7 million and $31.8 million , respectively. The average balance of impaired loans for the nine months ended September 30, 2017 was $51.2 million . The Company utilizes an internal nine-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4, with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (watch) or 6 (special mention). Loans with adverse classifications (substandard, doubtful or loss) are rated 7, 8 or 9, respectively. Commercial mortgage, commercial, multi-family and construction loans are rated individually, and each lending officer is responsible for risk rating loans in their portfolio. These risk ratings are then reviewed by the department manager and/or the Chief Lending Officer and by the Credit Department. The risk ratings are also confirmed through periodic loan review examinations, which are currently performed by an independent third-party. Reports by the independent third-party are presented directly to the Audit Committee of the Board of Directors. Loans receivable by credit quality risk rating indicator, excluding PCI loans, are as follows (in thousands): At September 30, 2017 Residential Commercial mortgage Multi- family Construction Total mortgages Commercial Consumer Total loans Special mention $ 3,525 19,437 16 — 22,978 26,156 1,080 50,214 Substandard 8,820 25,633 — — 34,453 30,361 2,034 66,848 Doubtful — — — — — 771 — 771 Loss — — — — — — — — Total classified and criticized 12,345 45,070 16 — 57,431 57,288 3,114 117,833 Pass/Watch 1,144,966 1,977,506 1,334,968 324,692 4,782,132 1,651,554 478,148 6,911,834 Total $ 1,157,311 2,022,576 1,334,984 324,692 4,839,563 1,708,842 481,262 7,029,667 At December 31, 2016 Residential Commercial mortgage Multi- family Construction Total mortgages Commercial Consumer Total loans Special mention $ 6,563 25,329 563 — 32,455 14,840 1,242 48,537 Substandard 12,021 23,011 553 2,517 38,102 47,255 2,940 88,297 Doubtful — — — — — — — — Loss — — — — — — — — Total classified and criticized 18,584 48,340 1,116 2,517 70,557 62,095 4,182 136,834 Pass/Watch 1,193,088 1,930,229 1,400,938 262,297 4,786,552 1,568,349 512,573 6,867,474 Total $ 1,211,672 1,978,569 1,402,054 264,814 4,857,109 1,630,444 516,755 7,004,308 |