Loans Receivable | Loans receivable are as follows: December 31, 2017 2016 One-to-four family residential real estate $ 97,814 $ 135,218 Multi-family mortgage 588,383 542,887 Nonresidential real estate 169,971 182,152 Construction and land 1,358 1,302 Commercial loans 152,552 99,088 Commercial leases 310,076 356,514 Consumer 1,597 2,255 1,321,751 1,319,416 Net deferred loan origination costs 1,266 1,663 Allowance for loan losses (8,366 ) (8,127 ) Loans, net $ 1,314,651 $ 1,312,952 Loan Origination/Risk Management. The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. The Company reviews and approves these policies and procedures on a periodic basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans via trend and risk rating migration. The Company requires title insurance insuring the priority of our lien on real estate collateral, fire and extended coverage casualty insurance, and, if appropriate, flood insurance, in order to protect our security interest in the underlying real property. The majority of the loans the Company originates are commercial-related loans, such as multi-family, nonresidential real estate, commercial, construction and land loans, and commercial leases. In addition, we originated one-to-four family residential mortgage loans and consumer loans until December 31, 2017. We also occasionally purchase and sell loan participations. The following briefly describes our principal loan products. The Company originates real estate loans principally secured by first liens both non-owner occupied and owner occupied commercial real estate. The non-owner occupied commercial real estate properties are predominantly multi-family apartment buildings, office buildings, light industrial buildings, shopping centers and mixed-use developments and, to a much lesser extent, more specialized properties such as nursing homes and other healthcare facilities. Multi-family mortgage loans generally are secured by multi-family rental properties such as apartment buildings, including subsidized apartment units. In general, loan amounts range between $500,000 and $5.0 million . Approximately 46.5% of the collateral is located outside of our primary market area; however, we do not have a concentration in any single market in excess of 25% of our loan portfolio outside of our primary market area. In underwriting multi-family mortgage loans, the Company considers a number of factors, which include the projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120% ), the age and condition of the collateral, the financial resources and income level of the borrower, the borrower’s experience in owning or managing similar properties and, proximity to diverse employment opportunities. Multi-family mortgage loans are generally originated in amounts up to 80% of the appraised value of the property securing the loan. Personal guarantees are usually obtained on multi-family mortgage loans if the borrower/property owner is a legal entity. Loans secured by multi-family mortgages generally involve a greater degree of credit risk than one-to-four family residential mortgage loans and carry larger loan balances. This increased credit risk is a result of several factors, including the concentration of principal in a limited number of loans and borrowers, the effects of general economic conditions on income producing properties, and the increased difficulty of evaluating and monitoring these types of loans. Furthermore, the repayment of loans secured by multi-family mortgages typically depends upon the successful operation of the related real estate property. If the cash flow from the project is reduced below acceptable thresholds, the borrower’s ability to repay the loan may be impaired. The Company emphasizes nonresidential real estate loans with initial principal balances between $250,000 and $5.0 million . Substantially all of our nonresidential real estate loans are secured by properties located in our primary market area. The Company’s nonresidential real estate loans are generally written as three - or five -year adjustable-rate mortgages or mortgages with balloon maturities of three or five years. Amortization on these loans is typically based on 20 - to 30 -year schedules. The Company also originates some 15 -year fixed-rate, fully amortizing loans. In the underwriting of nonresidential real estate loans, the Company generally lends up to 80% of the property’s appraised value. Decisions to lend are based on the economic viability of the property as the primary source of repayment and the creditworthiness of the borrower. In evaluating a proposed commercial real estate loan, we emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally requiring a minimum ratio of 120% ), computed after deduction for a vacancy factor and property expenses we deem appropriate. Personal guarantees are usually pursued and obtained from nonresidential real estate borrowers. Nonresidential real estate loans generally carry higher interest rates and have shorter terms than one-to-four family residential mortgage loans. Nonresidential real estate loans, however, entail significant additional credit risks compared to one-to-four family residential mortgage loans, as they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment of loans secured by income-producing properties typically depends on the successful operation of the related real estate project and thus may be subject to a greater extent to adverse conditions in the real estate market and in the general economy. The Company makes various types of secured and unsecured commercial loans to customers in our market area for the purpose of financing equipment acquisition, expansion, working capital and other general business purposes. The terms of these loans generally range from less than one year to five years. The loans are either negotiated on a fixed-rate basis or carry adjustable interest rates indexed to (i) a lending rate that is determined internally, or (ii) a short-term market rate index. Commercial credit decisions are based upon our assessment of the borrower’s cash flow, proposed collateral, business and credit history and any additional positive or negative credit risk factors.. The Company determines the borrower’s ability to repay in accordance with the proposed terms of the loans and we assess the risks involved. An evaluation is made of the borrower to determine character and capacity to manage. Personal guarantees of the principals are pursued and usually obtained. In addition to evaluating the loan borrower’s financial statements, we consider the adequacy of the primary and secondary sources of repayment for the loan. Independent reports of the borrower’s credit history supplement our analysis of the borrower’s creditworthiness and at times are supplemented with inquiries to other banks and trade investigations. Moreover, certain assets listed on personal financial statements are verified. Proposed collateral for a secured transaction also is analyzed to determine its marketability. Commercial business loans generally have higher interest rates than residential loans of like duration because they have a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business and the sufficiency of any collateral. Pricing of commercial loans is based primarily on the credit risk of the borrower, with due consideration given to borrowers with appropriate deposit relationships. The Company also lends money to small and mid-size leasing companies for equipment financing leases. Generally, commercial leases are secured by an assignment by the leasing company of the lease payments and by a secured interest in the equipment being leased. In most cases, the lessee acknowledges our security interest in the leased equipment and agrees to send lease payments directly to us. Consequently, the Company underwrites lease loans by examining the creditworthiness of the lessee rather than the lessor. Lease loans generally are non-recourse to the leasing company. The Company’s commercial leases are secured primarily by technology equipment, medical equipment, material handling equipment and other capital equipment. Lessees tend to be publicly-traded companies with investment-grade rated debt or companies that have not issued public debt and therefore do not have a public debt rating. The Company requires that a minimum of 50% of our commercial lessees have an investment-grade public debt rating by Moody’s or Standard & Poors, or the equivalent. Commercial leases to these entities have a maximum outstanding credit exposure of $15.0 million to any single entity. If the lessee does not have a public debt rating, they are subject to the same internal credit analysis as any other customer. Typically, commercial leases to these lessees have a maximum maturity of five years and a maximum outstanding credit exposure of $10.0 million to any single entity. In addition, the Company will originate commercial leases to lessees with below investment-grade public debt ratings and have a maximum outstanding credit exposure of $10.0 million to any single entity. Lease loans are almost always fully amortizing, with fixed interest rates. Although the Company does not actively originate construction and land loans presently, construction and land loans generally consist of land acquisition loans to help finance the purchase of land intended for further development, including single-family homes, multi-family housing and commercial income property, development loans to builders in our market area to finance improvements to real estate, consisting mostly of single-family subdivisions, typically to finance the cost of utilities, roads, sewers and other development costs. These builders generally rely on the sale of single-family homes to repay development loans, although in some cases the improved building lots may be sold to another builder, often in conjunction with development loans. Construction and land loans typically involve a higher degree of credit risk than financing on improved, owner occupied real estate. The risk of loss on construction and land loans is largely dependent upon the accuracy of the initial appraisal of the property’s value upon completion of construction or development; the estimated cost of construction, including interest; and the estimated time to complete and/or sell or lease such property. In the event that the Company were to make any new construction and development loans, it would seek to minimize these risks by maintaining consistent lending policies and underwriting standards. However, if the estimate of value proves to be inaccurate, the cost of completion is greater than expected, the length of time to complete and/or sell or lease the collateral property is greater than anticipated, or if there is a downturn in the local economy or real estate market, the property could have a value upon completion that is insufficient to assure full repayment of the loan. This could have a material adverse effect on the quality of the construction and land loan portfolio, and could result in significant losses or delinquencies if that portfolio were ever to increase in size. Up through December 31, 2017, the Company offered conforming and non-conforming, fixed-rate and adjustable-rate residential mortgage loans with maturities of up to 30 years and maximum loan amounts generally of up to $2.5 million . One-to-four family residential mortgage loans were generally underwritten according to Fannie Mae guidelines, and loans that conformed to such guidelines are referred to as “conforming loans.” The Company generally originated both fixed- and adjustable-rate loans in amounts up to the maximum conforming loan limits as established by Fannie Mae, which is currently $424,100 for single-family homes. Private mortgage insurance is required for first mortgage loans with loan-to-value ratios in excess of 80% . The Company also occasionally originated loans above conforming limits, sometimes referred to as “jumbo loans,” that were underwritten to the credit standards of Fannie Mae. These loans were generally eligible for sale to various firms that specialize in the purchase of such non-conforming loans. The ability of the Company’s borrowers to repay their loans, and the value of the collateral securing such loans, could be adversely impacted by economic weakness in its local markets as a result of unemployment, declining real estate values, or increased residential, office, industrial and retail shopping vacancies due to changes in business conditions. This not only could result in the Company experiencing charge-offs and/or nonperforming assets, but also could necessitate an increase in the provision for loan losses. These events, if they were to recur, would have an adverse impact on the Company’s results of operations and its capital. The following tables present the balance in the allowance for loan losses and the loans receivable by portfolio segment and based on impairment method: Allowance for loan losses Loan Balances Individually evaluated for impairment Collectively evaluated for impairment Total Individually evaluated for impairment Collectively evaluated for impairment Total December 31, 2017 One-to-four family residential real estate $ — $ 850 $ 850 $ 4,265 $ 93,549 $ 97,814 Multi-family mortgage — 3,849 3,849 949 587,434 588,383 Nonresidential real estate — 1,605 1,605 — 169,971 169,971 Construction and land — 32 32 — 1,358 1,358 Commercial loans — 1,357 1,357 — 152,552 152,552 Commercial leases — 655 655 — 310,076 310,076 Consumer — 18 18 — 1,597 1,597 $ — $ 8,366 $ 8,366 $ 5,214 $ 1,316,537 1,321,751 Net deferred loan origination costs 1,266 Allowance for loan losses (8,366 ) Loans, net $ 1,314,651 Allowance for loan losses Loan Balances Individually evaluated for impairment Collectively evaluated for impairment Total Individually evaluated for impairment Collectively evaluated for impairment Total December 31, 2016 One-to-four family residential real estate $ — $ 1,168 $ 1,168 $ 4,962 $ 130,256 $ 135,218 Multi-family mortgage — 3,647 3,647 787 542,100 542,887 Nonresidential real estate 26 1,768 1,794 260 181,892 182,152 Construction and land — 32 32 — 1,302 1,302 Commercial loans — 733 733 — 99,088 99,088 Commercial leases — 714 714 — 356,514 356,514 Consumer — 39 39 — 2,255 2,255 $ 26 $ 8,101 $ 8,127 $ 6,009 $ 1,313,407 1,319,416 Net deferred loan origination costs 1,663 Allowance for loan losses (8,127 ) Loans, net $ 1,312,952 Activity in the allowance for loan losses is as follows: For the years ended December 31, 2017 2016 2015 Beginning balance $ 8,127 $ 9,691 $ 11,990 Loans charged off: One-to-four family residential real estate (318 ) (539 ) (386 ) Multi-family mortgage (10 ) (79 ) (198 ) Nonresidential real estate (165 ) (1,718 ) (391 ) Commercial loans — — (152 ) Consumer (10 ) (25 ) (16 ) (503 ) (2,361 ) (1,143 ) Recoveries: One-to-four family residential real estate 145 321 702 Multi-family mortgage 70 162 182 Nonresidential real estate 17 200 509 Construction and land — 35 44 Commercial loans 594 309 611 Commercial leases 2 7 1 Consumer 1 2 1 829 1,036 2,050 Net recoveries (charge-off) 326 (1,325 ) 907 Recovery of loan losses (87 ) (239 ) (3,206 ) Ending balance $ 8,366 $ 8,127 $ 9,691 Impaired loans Several of the following disclosures are presented by “recorded investment,” which the FASB defines as “the amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.” The following represents the components of recorded investment: Loan principal balance Less unapplied payments Plus negative unapplied balance Less escrow balance Plus negative escrow balance Plus unamortized net deferred loan costs Less unamortized net deferred loan fees Plus unamortized premium Less unamortized discount Less previous charge-offs Plus recorded accrued interest Less reserve for uncollected interest = Recorded investment The following tables present loans individually evaluated for impairment by class of loans: Loan Balance Recorded Investment Partial Charge-off Allowance for Loan Losses Allocated Average Investment in Impaired Loans Interest Income Recognized December 31, 2017 With no related allowance recorded One-to-four family residential real estate $ 5,049 $ 4,248 $ 806 $ — $ 4,212 $ 197 Multi-family mortgage 958 948 — — 847 41 $ 6,007 $ 5,196 $ 806 $ — $ 5,059 $ 238 Loan Balance Recorded Investment Partial Charge-off Allowance for Loan Losses Allocated Average Investment in Impaired Loans Interest Income Recognized December 31, 2016 With no related allowance recorded One-to-four family residential real estate $ 5,379 $ 4,548 $ 886 $ — $ 2,947 $ 70 One-to-four family residential real estate - non-owner occupied 503 386 119 — 251 9 Multi-family mortgage 787 787 — — 980 41 6,669 5,721 1,005 — 4,178 120 With an allowance recorded - Nonresidential real estate 262 260 21 26 164 — $ 6,931 $ 5,981 $ 1,026 $ 26 $ 4,342 $ 120 Nonaccrual loans The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans: Loan Balance Recorded Investment Loans Past Due Over 90 Days, still accruing December 31, 2017 One-to-four family residential real estate $ 3,413 $ 1,918 $ — One-to-four family residential real estate – non owner occupied 308 109 — Multi-family mortgage 376 363 — Nonresidential real estate — — — $ 4,097 $ 2,390 $ — December 31, 2016 One-to-four family residential real estate $ 2,861 $ 2,483 $ — One-to-four family residential real estate – non owner occupied 428 368 — Multi-family mortgage 187 185 — Nonresidential real estate 262 260 — $ 3,738 $ 3,296 $ — Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. The Company’s reserve for uncollected loan interest was $103,000 and $199,000 at December 31, 2017 and 2016 , respectively. When a loan is on non-accrual status and the ultimate collectability of the total principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. Alternatively, when a loan is on non-accrual status but there is doubt concerning only the ultimate collectability of interest, contractual interest is credited to interest income only when received, under the cash basis method pursuant to the provisions of FASB ASC 310–10, as applicable. In all cases, the average balances are calculated based on the month–end balances of the financing receivables within the period reported pursuant to the provisions of FASB ASC 310–10, as applicable. Past Due Loans The following tables present the aging of the recorded investment in past due loans at December 31, 2017 by class of loans: 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total One-to-four family residential real estate $ 86 $ 99 $ 1,801 $ 1,986 $ 74,216 $ 76,202 One-to-four family residential real estate - non-owner occupied 10 3 86 99 20,944 21,043 Multi-family mortgage - Illinois 172 — 364 536 287,171 287,707 Multi-family mortgage - Other — — — — 296,440 296,440 Nonresidential real estate 608 — — 608 166,071 166,679 Construction — — — — 1,103 1,103 Land — — — — 259 259 Commercial loans: Regional Commercial Banking — — — — 40,935 40,935 Health Care — — — — 71,738 71,738 Direct Commercial Lessor — — — — 40,237 40,237 Commercial leases: — Investment-grade 934 — — 934 207,747 208,681 Other 288 — — 288 102,873 103,161 Consumer — — — — 1,605 1,605 Total $ 2,098 $ 102 $ 2,251 $ 4,451 $ 1,311,339 $ 1,315,790 The following tables present the aging of the recorded investment in past due loans as December 31, 2016 by class of loans: 30-59 Days Past Due 60-89 Days Past Due Greater Than 89 Days Past Due Total Past Due Loans Not Past Due Total One-to-four family residential real estate $ 984 $ 335 $ 2,235 $ 3,554 $ 92,665 $ 96,219 One-to-four family residential real estate - non-owner occupied 664 114 368 1,146 37,179 38,325 Multi-family mortgage - Illinois 605 439 184 1,228 294,223 295,451 Multi-family mortgage - Other — — — — 243,944 243,944 Nonresidential real estate — — 260 260 178,644 178,904 Construction — — — — 950 950 Land — — — — 349 349 Commercial loans: Regional Commercial Banking — — — — 26,480 26,480 Health Care — — — — 41,086 41,086 Direct Commercial Lessor — — — — 31,847 31,847 Commercial leases: — Investment-grade 51 — — 51 273,405 273,456 Other — — — — 84,988 84,988 Consumer — — — — 2,263 2,263 $ 2,304 $ 888 $ 3,047 $ 6,239 $ 1,308,023 $ 1,314,262 Troubled Debt Restructurings The Company evaluates loan extensions or modifications in accordance with FASB ASC 310–40 with respect to the classification of the loan as a TDR. In general, if the Company grants a loan extension or modification to a borrower for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above. The Company had $17,000 of TDRs at December 31, 2017 , compared to $341,000 at December 31, 2016 , with no specific valuation reserves allocated at December 31, 2017 and 2016 . The Company had no outstanding commitments to borrowers whose loans are classified as TDRs at either date. The following table presents loans classified as TDRs: December 31, 2017 2016 One-to-four family residential real estate - Accrual $ — $ 205 One-to-four family residential real estate - Nonaccrual 17 136 $ 17 $ 341 During the year ending December 31, 2017 , there were no loans modified and classified as TDRs. During the year ending December 31, 2016 , the terms of certain loans were modified and classified as TDRs. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. The following tables present TDRs that occurred during the year: For the years ended December 31, 2017 2016 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 One-to-four family residential real estate — $ — $ — 1 $ 63 $ 63 Due to reduction in interest rate Due to extension of maturity date Due to permanent reduction in recorded investment Total For the year ended December 31, 2016 One-to-four family residential real estate $ — $ 63 $ — $ 63 The TDRs described above had no impact on interest income, resulted in no change to the allowance for loan losses and resulted in no charge-offs for the year ended December 31, 2016 . The following table presents TDRs for which there was a payment default within twelve months following the modification: For the years ended December 31, 2017 2016 Number of loans Recorded investment Number of loans Recorded investment One-to-four family residential real estate — $ — 2 $ 87 A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The TDRs that subsequently defaulted described above had no material impact on the allowance for loans losses during the year ending December 31, 2016 . The terms of certain other loans were modified during the year ending December 31, 2017 in circumstances that did not meet the definition of a TDR. These loans have a total recorded investment of $149,000 and $868,000 at December 31, 2017 and 2016 , respectively. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant. 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. Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans based on credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings: Special Mention. A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Substandard. Loans categorized as substandard continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. The loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time. The risk rating guidance published by the Office of the Comptroller of the Currency clarifies that a loan with a well-defined weakness does not have to present a probability of default for the loan to be rated Substandard, and that an individual loan’s loss potential does not have to be distinct for the loan to be rated Substandard. Nonaccrual. An asset classified Nonaccrual has all the weaknesses inherent in one classified 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 loans were placed on nonaccrual status. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered “Pass” rated loans. As of December 31, 2017 , and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: Pass Special Mention Substandard Nonaccrual Total One-to-four family residential real estate $ 74,437 $ — $ 255 $ 1,914 $ 76,606 One-to-four family residential real estate - non-owner occupied 21,059 — 40 109 21,208 Multi-family mortgage - Illinois 290,765 — 225 368 291,358 Multi-family mortgage - Other 297,025 — — — 297,025 Nonresidential real estate 169,817 — 154 — 169,971 Construction 1,099 — — — 1,099 Land 259 — — — 259 Commercial loans: Regional commercial banking 36,373 4,528 — — 40,901 Health care 69,480 — 2,248 — 71,728 Direct commercial lessor 39,923 — — — 39,923 Commercial leases: Investment-grade 207,460 — — — 207,460 Other 102,616 — — — 102,616 Consumer 1,597 — — — 1,597 $ 1,311,910 $ 4,528 $ 2,922 $ 2,391 $ 1,321,751 As of December 31, 2016 , and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: Pass Special Mention Substandard Nonaccrual Total One-to-four family residential real estate $ 93,514 $ — $ 629 $ 2,486 $ 96,629 One-to-four family residential real estate - non-owner occupied 38,179 — 41 369 38,589 Multi-family mortgage - Illinois 297,826 122 1,048 187 299,183 Multi-family mortgage - Other 243,704 — — — 243,704 Nonresidential real estate 180,047 — 1,845 260 182,152 Construction 946 — — — 946 Land 356 — — — 356 Commercial loans: Regional commercial banking 26,365 — 66 — 26,431 Health care 41,001 — — — 41,001 Direct commercial lessor 30,881 800 — — 31,681 Commercial leases: Investment-grade 271,972 — — — 271,972 Other 84,356 161 — — 84,517 Consumer 2,255 — — — 2,255 $ 1,311,402 $ 1,083 $ 3,629 $ 3,302 $ 1,319,416 |