LOANS | LOANS Loans consist of the following: (Dollars in thousands) March 31, December 31, Permanent mortgages on: Multifamily residential $ 4,058,869 $ 3,985,981 Single family residential 1,930,831 2,021,320 Commercial real estate 205,657 203,134 Construction and land loans 22,857 20,442 Non-Mortgage (‘‘NM’’) loans 100 100 Total 6,218,314 6,230,977 Allowance for loan losses (40,657 ) (36,001 ) Loans held for investment, net $ 6,177,657 $ 6,194,976 Certain loans have been pledged to secure borrowing arrangements (see Note 8). The following table summarizes activity in and the allocation of the allowance for loan losses by portfolio segment: (Dollars in thousands) Multifamily Residential Single Family Residential Commercial Real Estate Land, Construction and NM Total Three months ended March 31, 2020 Allowance for loan losses: Beginning balance allocated to portfolio segments $ 23,372 $ 10,076 $ 2,341 $ 212 $ 36,001 Provision for (reversal of) loan losses 3,936 1,069 336 (41 ) 5,300 Charge-offs — (722 ) — — (722 ) Recoveries — 3 — 75 78 Ending balance allocated to portfolio segments $ 27,308 $ 10,426 $ 2,677 $ 246 $ 40,657 Three months ended March 31, 2019 Allowance for loan losses: Beginning balance allocated to portfolio segments $ 21,326 $ 10,125 $ 2,441 $ 422 $ 34,314 Provision for (reversal of) loan losses 720 (239 ) (163 ) (18 ) 300 Charge-offs — — — — — Recoveries — 3 — 75 78 Ending balance allocated to portfolio segments $ 22,046 $ 9,889 $ 2,278 $ 479 $ 34,692 The following table summarizes the allocation of the allowance for loan losses by impairment methodology: (Dollars in thousands) Multifamily Residential Single Family Residential Commercial Real Estate Land, Construction and NM Total As of March 31, 2020: Ending allowance balance allocated to: Loans individually evaluated for impairment $ — $ 25 $ — $ — $ 25 Loans collectively evaluated for impairment 27,308 10,401 2,677 246 40,632 Ending balance $ 27,308 $ 10,426 $ 2,677 $ 246 $ 40,657 Loans: Ending balance: individually evaluated for impairment $ 537 $ 6,331 $ — $ — $ 6,868 Ending balance: collectively evaluated for impairment 4,058,332 1,924,500 205,657 22,957 6,211,446 Ending balance $ 4,058,869 $ 1,930,831 $ 205,657 $ 22,957 $ 6,218,314 As of December 31, 2019: Ending allowance balance allocated to: Loans individually evaluated for impairment $ — $ 815 $ — $ — $ 815 Loans collectively evaluated for impairment 23,372 9,261 2,341 212 35,186 Ending balance $ 23,372 $ 10,076 $ 2,341 $ 212 $ 36,001 Loans: Ending balance: individually evaluated for impairment $ 541 $ 7,097 $ — $ — $ 7,638 Ending balance: collectively evaluated for impairment 3,985,440 2,014,223 203,134 20,542 6,223,339 Ending balance $ 3,985,981 $ 2,021,320 $ 203,134 $ 20,542 $ 6,230,977 The Company assigns a risk rating to all loans and periodically performs detailed reviews of all such loans to identify credit risks and to assess the overall collectability of the portfolio. During these internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, as well as the financial performance and other characteristics of loan collateral. These credit quality indicators are used to assign a risk rating to each individual loan. The risk ratings can be grouped into six major categories, defined as follows: Pass assets are those which are performing according to contract and have no existing or known weaknesses deserving of management’s close attention. The basic underwriting criteria used to approve the loans are still valid, and all payments have essentially been made as planned. Watch assets are expected to have an event occurring in the next 90 to 120 days that will lead to a change in risk rating with the change being either favorable or unfavorable. These assets require heightened monitoring of the event by management. Special mention assets have 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 Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Substandard assets are inadequately protected by the current net worth and/or paying capacity of the obligor or by the collateral pledged. These assets have well-defined weaknesses: the primary source of repayment is gone or severely impaired (i.e., bankruptcy or loss of employment) and/or there has been a deterioration in collateral value. In addition, there is the distinct possibility that the Company will sustain some loss, either directly or indirectly (i.e., the cost of monitoring), if the deficiencies are not corrected. A deterioration in collateral value alone does not mandate that an asset be adversely classified if such factor does not indicate that the primary source of repayment is in jeopardy. Doubtful assets have the weaknesses of those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable based on current facts, conditions and values. Loss assets are considered uncollectible and of such little value that their continuance as assets, without establishment of a specific valuation allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has absolutely no recovery or salvage value; but rather, it is not practical or desirable to defer writing off a basically worthless asset (or portion thereof) even though partial recovery may be affected in the future. The following table summarizes the loan portfolio allocated by management’s internal risk ratings at March 31, 2020 and December 31, 2019 : (Dollars in thousands) Multifamily Residential Single Family Residential Commercial Real Estate Land, Construction and NM Total As of March 31, 2020: Grade: Pass $ 3,989,553 $ 1,898,641 $ 203,857 $ 22,957 $ 6,115,008 Watch 51,699 14,844 1,800 — 68,343 Special mention 16,692 10,108 — — 26,800 Substandard 925 7,238 — — 8,163 Doubtful — — — — — Total $ 4,058,869 $ 1,930,831 $ 205,657 $ 22,957 $ 6,218,314 As of December 31, 2019: Grade: Pass $ 3,917,264 $ 1,980,845 $ 200,371 $ 20,542 $ 6,119,022 Watch 47,309 16,432 2,763 — 66,504 Special mention 19,708 13,635 — — 33,343 Substandard 1,700 8,808 — — 10,508 Doubtful — 1,600 — — 1,600 Total $ 3,985,981 $ 2,021,320 $ 203,134 $ 20,542 $ 6,230,977 The following table summarizes an aging analysis of the loan portfolio by the time past due at March 31, 2020 and December 31, 2019 : (Dollars in thousands) 30 Days 60 Days 90+ Days Non-accrual Current Total As of March 31, 2020: Loans: Multifamily residential $ — $ 897 $ — $ 537 $ 4,057,435 $ 4,058,869 Single family residential 1,066 1,720 — 5,036 1,923,009 1,930,831 Commercial real estate — — — — 205,657 205,657 Land, construction and NM — — — — 22,957 22,957 Total $ 1,066 $ 2,617 $ — $ 5,573 $ 6,209,058 $ 6,218,314 As of December 31, 2019: Loans: Multifamily residential $ 1,411 $ — $ — $ 541 $ 3,984,029 $ 3,985,981 Single family residential 4,037 690 — 5,792 2,010,801 2,021,320 Commercial real estate — — — — 203,134 203,134 Land, construction and NM — — — — 20,542 20,542 Total $ 5,448 $ 690 $ — $ 6,333 $ 6,218,506 $ 6,230,977 At March 31, 2020 , there were 5 single family residential loans totaling $6.0 million and 1 multifamily residential loan totaling $595 thousand that would have been reported as 30 days delinquent loans if not for COVID-19 related requests. See Note 2 to the unaudited consolidated financial statements for additional information. The following table summarizes information related to impaired loans at March 31, 2020 and December 31, 2019 : As of March 31, 2020 As of December 31, 2019 (Dollars in thousands) Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With no related allowance recorded: Multifamily residential $ 537 $ 614 $ — $ 541 $ 618 $ — Single family residential 5,430 6,472 — 4,588 4,915 — 5,967 7,086 — 5,129 5,533 — With an allowance recorded: Single family residential 901 898 25 2,509 2,484 815 901 898 25 2,509 2,484 815 Total: Multifamily residential 537 614 — 541 618 — Single family residential 6,331 7,370 25 7,097 7,399 815 $ 6,868 $ 7,984 $ 25 $ 7,638 $ 8,017 $ 815 The following tables summarize information related to impaired loans for the three months ended March 31, 2020 and 2019 : Three Months Ended March 31, 2020 2019 (Dollars in thousands) Average Recorded Investment Interest Income Cash Basis Interest Average Recorded Investment Interest Income Cash Basis Interest With no related allowance recorded: Multifamily residential $ 539 $ 8 $ 8 $ 560 $ 3 $ 3 Single family residential 4,790 19 14 4,148 36 — Commercial real estate — — — — — — 5,329 27 22 4,708 39 3 With an allowance recorded: Single family residential 2,105 11 — 929 12 — 2,105 11 — 929 12 — Total: Multifamily residential 539 8 8 560 3 3 Single family residential 6,895 30 14 5,077 48 — Commercial real estate — — — — — — $ 7,434 $ 38 $ 22 $ 5,637 $ 51 $ 3 The following table summarizes the recorded investment related to troubled debt restructurings ("TDRs") at March 31, 2020 and December 31, 2019 : (Dollars in thousands) March 31, December 31, Troubled debt restructurings: Single family residential $ 1,296 $ 1,305 The Company has allocated $25 thousand of its allowance for loan losses for loans modified in TDRs at both March 31, 2020 and December 31, 2019 . The Company does not have commitments to lend additional funds to borrowers with loans whose terms have been modified in TDRs. There were no new troubled debt restructurings during the three months ended March 31, 2020 and 2019 . See Note 2 to the unaudited consolidated financial statements for additional information. The Company had no TDRs with a subsequent payment default within twelve months following the modification during the three months ended March 31, 2020 and 2019 . A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. |