Loans Receivable and Allowance for Loan Losses | Loans Receivable and Allowance for Loan Losses Loans receivable at June 30, 2019 and December 31, 2018 are summarized as follows (in thousands): June 30, 2019 December 31, 2018 Mortgage loans: Residential $ 1,075,909 1,099,464 Commercial 2,362,762 2,299,313 Multi-family 1,351,761 1,339,677 Construction 383,233 388,999 Total mortgage loans 5,173,665 5,127,453 Commercial loans 1,713,018 1,695,021 Consumer loans 410,993 431,428 Total gross loans 7,297,676 7,253,902 Purchased credit-impaired ("PCI") loans 861 899 Premiums on purchased loans 2,959 3,243 Unearned discounts (33) (33) Net deferred fees (7,728) (7,423) Total loans $ 7,293,735 7,250,588 The following tables summarize the aging of loans receivable by portfolio segment and class of loans, excluding PCI loans (in thousands): June 30, 2019 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Mortgage loans: Residential $ 3,710 3,675 6,490 — 13,875 1,062,034 1,075,909 Commercial — 141 1,753 — 1,894 2,360,868 2,362,762 Multi-family — — — — — 1,351,761 1,351,761 Construction — — — — — 383,233 383,233 Total mortgage loans 3,710 3,816 8,243 — 15,769 5,157,896 5,173,665 Commercial loans 1,777 3,825 28,796 — 34,398 1,678,620 1,713,018 Consumer loans 1,633 104 1,516 — 3,253 407,740 410,993 Total gross loans $ 7,120 7,745 38,555 — 53,420 7,244,256 7,297,676 December 31, 2018 30-59 Days 60-89 Days Non-accrual Recorded Total Past Current Total Loans Receivable Mortgage loans: Residential $ 4,188 5,557 5,853 — 15,598 1,083,866 1,099,464 Commercial — — 3,180 — 3,180 2,296,133 2,299,313 Multi-family — — — — — 1,339,677 1,339,677 Construction — — — — — 388,999 388,999 Total mortgage loans 4,188 5,557 9,033 — 18,778 5,108,675 5,127,453 Commercial loans 425 13,565 15,391 — 29,381 1,665,640 1,695,021 Consumer loans 1,238 610 1,266 — 3,114 428,314 431,428 Total gross loans $ 5,851 19,732 25,690 — 51,273 7,202,629 7,253,902 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 $38.6 million and $25.7 million at June 30, 2019 and December 31, 2018, respectively. Included in non-accrual loans were $20.7 million and $11.1 million of loans which were less than 90 days past due at June 30, 2019 and December 31, 2018, respectively. There were no loans 90 days or greater past due and still accruing interest at June 30, 2019 or December 31, 2018. 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 a TDR. 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 generally 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 June 30, 2019, there were 156 impaired loans totaling $70.6 million. Included in this total were 130 TDRs related to 126 borrowers totaling $45.5 million that were performing in accordance with their restructured terms and which continued to accrue interest at June 30, 2019. At December 31, 2018, there were 152 impaired loans totaling $50.7 million. Included in this total were 129 TDRs to 124 borrowers totaling $35.6 million that were performing in accordance with their restructured terms and which continued to accrue interest at December 31, 2018. The following table summarizes loans receivable by portfolio segment and impairment method, excluding PCI loans (in thousands): June 30, 2019 Mortgage Commercial Consumer Total Portfolio Individually evaluated for impairment $ 36,665 31,804 2,093 70,562 Collectively evaluated for impairment 5,137,000 1,681,214 408,900 7,227,114 Total gross loans $ 5,173,665 1,713,018 410,993 7,297,676 December 31, 2018 Mortgage Commercial Consumer Total Portfolio Individually evaluated for impairment $ 24,680 23,747 2,257 50,684 Collectively evaluated for impairment 5,102,773 1,671,274 429,171 7,203,218 Total gross loans $ 5,127,453 1,695,021 431,428 7,253,902 The allowance for loan losses is summarized by portfolio segment and impairment classification as follows (in thousands): June 30, 2019 Mortgage Commercial loans Consumer loans Total Individually evaluated for impairment $ 894 8,450 46 9,390 Collectively evaluated for impairment 26,386 25,099 1,935 53,420 Total gross loans $ 27,280 33,549 1,981 62,810 December 31, 2018 Mortgage Commercial loans Consumer Total Individually evaluated for impairment $ 1,026 92 47 1,165 Collectively evaluated for impairment 26,652 25,601 2,144 54,397 Total gross loans $ 27,678 25,693 2,191 55,562 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 six months ended June 30, 2019 and 2018, along with their balances immediately prior to the modification date and post-modification as of June 30, 2019 and 2018. For the three months ended June 30, 2019 June 30, 2018 Troubled Debt Restructurings Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification ($ in thousands) Mortgage loans: Residential 2 $ 749 $ 718 1 $ 118 $ 103 Total mortgage loans 2 749 718 1 118 103 Commercial loans 4 1,490 1,480 — — — Total restructured loans 6 $ 2,239 $ 2,198 1 $ 118 $ 103 For the six months ended June 30, 2019 June 30, 2018 Troubled Debt Restructurings Number of Pre-Modification Post-Modification Number of Pre-Modification Post-Modification ($ in thousands) Mortgage loans: Residential 2 $ 749 $ 718 1 $ 118 $ 103 Commercial 1 14,010 14,010 — — — Total mortgage loans 3 14,759 14,728 1 — — Commercial loans 7 2,702 2,564 5 8,126 9,179 Total restructured loans 10 $ 17,461 $ 17,292 6 $ 8,244 $ 9,282 All TDRs are impaired loans, which are individually evaluated for impairment, as previously discussed. During the three and six months ended June 30, 2019, $2.0 million of charge-offs were recorded on collateral dependent impaired loans. During the three and six months ended June 30, 2018, $428,000 and $2.0 million of charge-offs were recorded on collateral dependent impaired loans, respectively. For both the three and six months ended June 30, 2019, the allowance for loan losses associated with the TDRs presented in the preceding tables totaled $63,000 and $166,000, respectively, and was included in the allowance for loan losses for loans individually evaluated for impairment. For the three and six months ended June 30, 2019, the TDRs presented in the preceding tables had a weighted average modified interest rate of approximately 4.99% and 3.99%, respectively, compared to a weighted average rate of 4.56% and 3.96% prior to modification, respectively. The following table presents loans modified as TDRs within the previous 12 months from June 30, 2019 and 2018, and for which there was a payment default (90 days or more past due) at the quarter ended June 30, 2019 and 2018. June 30, 2019 June 30, 2018 Troubled Debt Restructurings Subsequently Defaulted Number of Loans Outstanding Recorded Investment Number of Loans Outstanding Recorded ($ in thousands) Commercial loans 2 $ 642 3 $ 1,344 Total restructured loans 2 $ 642 3 $ 1,344 There were two loans which had a payment default (90 days or more past due) for loans modified as TDRs within the 12 month period ending June 30, 2019 . There were three payment defaults (90 days or more past due) to one borrower for loans modified as TDRs within the 12 month period ending June 30, 2018. 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. These loans are accounted for at fair value, based upon the present value of expected future cash flows, with no related allowance for loan losses. PCI loans totaled $861,000 at June 30, 2019 and $899,000 at December 31, 2018. The activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018 was as follows (in thousands): Three months ended June 30, Mortgage loans Commercial loans Consumer loans Total 2019 Balance at beginning of period $ 26,926 26,351 2,076 55,353 Provision charged to operations 262 9,175 63 9,500 Recoveries of loans previously charged-off 105 113 124 342 Loans charged-off (13) (2,090) (282) (2,385) Balance at end of period $ 27,280 33,549 1,981 62,810 2018 Balance at beginning of period $ 28,001 32,326 2,194 62,521 Provision (credited) charged to operations (782) 16,436 (154) 15,500 Recoveries of loans previously charged-off 44 105 213 362 Loans charged-off (102) (19,373) (89) (19,564) Balance at end of period $ 27,161 29,494 2,164 58,819 Six months ended June 30, Mortgage Commercial Consumer Total 2019 Balance at beginning of period $ 27,678 25,693 2,191 55,562 Provision (credited) charged to operations (720) 10,457 (37) 9,700 Recoveries of loans previously charged-off 336 165 254 755 Loans charged-off (14) (2,766) (427) (3,207) Balance at end of period $ 27,280 33,549 1,981 62,810 2018 Balance at beginning of period $ 28,052 29,814 2,329 60,195 Provision (credited) charged to operations (804) 21,825 (121) 20,900 Recoveries of loans previously charged-off 132 232 392 756 Loans charged-off (219) (22,377) (436) (23,032) Balance at end of period $ 27,161 29,494 2,164 58,819 The following table presents loans individually evaluated for impairment by class and loan category, excluding PCI loans (in thousands): June 30, 2019 December 31, 2018 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 $ 15,255 12,403 — 12,402 311 15,013 12,005 — 12,141 594 Commercial — — — — — 1,550 1,546 — 1,546 — Total 15,255 12,403 — 12,402 311 16,563 13,551 — 13,687 594 Commercial loans 6,051 4,696 — 5,101 55 21,746 16,254 — 17,083 328 Consumer loans 1,724 1,172 — 1,200 38 1,871 1,313 — 1,386 90 Total impaired loans $ 23,030 18,271 — 18,703 404 40,180 31,118 — 32,156 1,012 Loans with an allowance recorded Mortgage loans: Residential $ 9,631 9,225 782 9,278 629 10,573 10,090 954 10,186 425 Commercial 15,037 15,037 112 15,052 283 1,039 1,039 72 1,052 53 Total 24,668 24,262 894 24,330 912 11,612 11,129 1,026 11,238 478 Commercial loans 28,393 27,108 8,450 28,640 199 7,493 7,493 92 9,512 435 Consumer loans 932 921 46 932 25 954 944 47 962 40 Total impaired loans $ 53,993 52,291 9,390 53,902 1,136 20,059 19,566 1,165 21,712 953 Total impaired loans Mortgage loans: Residential $ 24,886 21,628 782 21,680 940 25,586 22,095 954 22,327 1,019 Commercial 15,037 15,037 112 15,052 283 2,589 2,585 72 2,598 53 Total 39,923 36,665 894 36,732 1,223 28,175 24,680 1,026 24,925 1,072 Commercial loans 34,444 31,804 8,450 33,741 254 29,239 23,747 92 26,595 763 Consumer loans 2,656 2,093 46 2,132 63 2,825 2,257 47 2,348 130 Total impaired loans $ 77,023 70,562 9,390 72,605 1,540 60,239 50,684 1,165 53,868 1,965 Specific allocations of the allowance for loan losses attributable to impaired loans totaled $9.4 million at June 30, 2019 and $1.2 million at December 31, 2018. At June 30, 2019 and December 31, 2018, impaired loans for which there was no related allowance for loan losses totaled $18.3 million and $31.1 million, respectively. The average balance of impaired loans for the six months ended June 30, 2019 and December 31, 2018 was $72.6 million and $53.9 million, respectively. 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 June 30, 2019 Residential Commercialmortgage Multi-family Construction Total Commercial Consumer Total loans Special mention $ 2,997 28,120 — — 31,117 72,209 104 103,430 Substandard 8,344 12,494 — 6,181 27,019 64,216 1,960 93,195 Doubtful — — — — — 6,602 — 6,602 Loss — — — — — — — — Total classified and criticized 11,341 40,614 — 6,181 58,136 143,027 2,064 203,227 Pass/Watch 1,064,568 2,322,148 1,351,761 377,052 5,115,529 1,569,991 408,929 7,094,449 Total $ 1,075,909 2,362,762 1,351,761 383,233 5,173,665 1,713,018 410,993 7,297,676 At December 31, 2018 Residential Commercialmortgage Multi-family Construction Total Commercial Consumer Total loans Special mention $ 5,071 14,496 228 — 19,795 67,396 610 87,801 Substandard 7,878 13,292 — 6,181 27,351 45,180 1,711 74,242 Doubtful — — — — — 923 — 923 Loss — — — — — — — — Total classified and criticized 12,949 27,788 228 6,181 47,146 113,499 2,321 162,966 Pass/Watch 1,086,515 2,271,525 1,339,449 382,818 5,080,307 1,581,522 429,107 7,090,936 Total $ 1,099,464 2,299,313 1,339,677 388,999 5,127,453 1,695,021 431,428 7,253,902 |