Loans Receivable | December 31, 2018 2017 One-to-four family residential real estate $ 70,371 $ 97,814 Multi-family mortgage 619,870 588,383 Nonresidential real estate 152,442 169,971 Construction and land 172 1,358 Commercial loans 187,406 152,552 Commercial leases 299,394 310,076 Consumer 1,539 1,597 1,331,194 1,321,751 Net deferred loan origination costs 1,069 1,266 Allowance for loan losses (8,470 ) (8,366 ) Loans, net $ 1,323,793 $ 1,314,651 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 collateral. 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 at December 31, 2018 . Approximately 55.0% 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 $500,000 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. Commercial leases to these entities have a maximum outstanding credit exposure of $20.0 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. Until 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, 2018 One-to-four family residential real estate $ — $ 699 $ 699 $ 2,218 $ 68,153 $ 70,371 Multi-family mortgage — 3,991 3,991 653 619,217 619,870 Nonresidential real estate 27 1,449 1,476 270 152,172 152,442 Construction and land — 4 4 — 172 172 Commercial loans — 1,517 1,517 — 187,406 187,406 Commercial leases — 755 755 — 299,394 299,394 Consumer — 28 28 — 1,539 1,539 $ 27 $ 8,443 $ 8,470 $ 3,141 $ 1,328,053 1,331,194 Net deferred loan origination costs 1,069 Allowance for loan losses (8,470 ) Loans, net $ 1,323,793 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 Activity in the allowance for loan losses is as follows: For the years ended 2018 2017 Beginning balance $ 8,366 $ 8,127 Loans charged off: One-to-four family residential real estate (231 ) (318 ) Multi-family mortgage (35 ) (10 ) Nonresidential real estate (93 ) (165 ) Commercial loans (140 ) — Consumer (19 ) (10 ) (518 ) (503 ) Recoveries: One-to-four family residential real estate 206 145 Multi-family mortgage 34 70 Nonresidential real estate — 17 Construction and land 2 — Commercial loans 229 594 Commercial leases 5 2 Consumer 1 1 477 829 Net recoveries (charge-off) (41 ) 326 Provision for (recovery of) loan losses 145 (87 ) Ending balance $ 8,470 $ 8,366 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, 2018 With no related allowance recorded One-to-four family residential real estate $ 2,751 $ 2,155 $ 575 $ — $ 3,274 $ 41 One-to-four family residential real estate - non-owner occupied 86 46 43 — 95 — Multi-family mortgage 654 653 — — 795 39 3,491 2,854 618 — 4,164 80 With an allowance recorded - Nonresidential real estate 356 270 93 27 21 — $ 3,847 $ 3,124 $ 711 $ 27 $ 4,185 $ 80 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 Nonaccrual loans The following tables present the recorded investment in nonaccrual and loans 90 days or more past due still on accrual by class of loans: Loan Balance Recorded Investment Loans Past Due Over 90 Days, still accruing December 31, 2018 One-to-four family residential real estate $ 2,167 $ 1,162 $ — One-to-four family residential real estate – non owner occupied 270 78 — Nonresidential real estate 356 270 — $ 2,793 $ 1,510 $ — 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 — $ 4,097 $ 2,390 $ — 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 $38,000 and $103,000 at December 31, 2018 and 2017 , 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, 2018 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 $ 1,380 $ 637 $ 1,162 $ 3,179 $ 53,820 $ 56,999 One-to-four family residential real estate - non-owner occupied 387 10 78 475 12,460 12,935 Multi-family mortgage - Illinois 458 — — 458 275,283 275,741 Multi-family mortgage - Other — — — — 340,470 340,470 Nonresidential real estate — 270 — 270 149,271 149,541 Construction — — — — — — Land — — — — 169 169 Commercial loans: Regional Commercial Banking — — — — 39,712 39,712 Health Care — — — — 85,418 85,418 Direct Commercial Lessor — — — — 62,719 62,719 Commercial leases: — Investment-grade 505 — — 505 166,713 167,218 Other — — — — 133,958 133,958 Consumer 40 4 — 44 1,508 1,552 Total $ 2,770 $ 921 $ 1,240 $ 4,931 $ 1,321,501 $ 1,326,432 The following tables present the aging of the recorded investment in past due loans as 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 $ 2,098 $ 102 $ 2,251 $ 4,451 $ 1,311,339 $ 1,315,790 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, 2018 and 2017 , with no specific valuation reserves allocated at December 31, 2018 and 2017 . 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, 2018 2017 One-to-four family residential real estate - Nonaccrual $ 17 $ 17 During the years ending December 31, 2018 and 2017 , there were no loans modified and classified as TDRs. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. 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, 2018 , 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 $ 55,353 $ 495 $ 328 $ 993 $ 57,169 One-to-four family residential real estate - non-owner occupied 12,911 — 37 254 13,202 Multi-family mortgage - Illinois 279,021 — 216 — 279,237 Multi-family mortgage - Other 340,633 — — — 340,633 Nonresidential real estate 151,793 281 98 270 152,442 Construction — — — — — Land 172 — — — 172 Commercial loans: Regional commercial banking 34,764 4,810 — — 39,574 Health care 85,001 — 342 — 85,343 Direct commercial lessor 62,489 — — — 62,489 Commercial leases: Investment-grade 165,508 701 — — 166,209 Other 133,185 — — — 133,185 Consumer 1,529 3 7 — 1,539 $ 1,322,359 $ 6,290 $ 1,028 $ 1,517 $ 1,331,194 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 |