| Loans Receivable, Net | Loans Receivable, Net The Company adopted the CECL methodology for measuring credit losses as of January 1, 2020. All disclosures as of and for the three and six months ended June 30, 2020 are presented in accordance with Topic 326. The Company did not recast comparative financial periods and has presented those disclosures under previously applicable GAAP. The detail of the loan portfolio as of June 30, 2020 and December 31, 2019 was as follows: June 30, December 31, (In thousands) Multi-family loans $ 7,377,929 7,813,236 Commercial real estate loans 4,873,353 4,831,347 Commercial and industrial loans 3,428,916 2,951,306 Construction loans 304,460 262,866 Total commercial loans 15,984,658 15,858,755 Residential mortgage loans 4,702,957 5,144,718 Consumer and other loans 674,392 699,796 Total loans 21,362,007 21,703,269 Deferred fees, premiums and other, net (1) (10,044 ) 907 Allowance for credit losses (273,319 ) (228,120 ) Net loans $ 21,078,644 21,476,056 (1) Included in deferred fees and premiums are accretable purchase accounting adjustments in connection with loans acquired and an adjustment to the carrying amount of the residential loans hedged. The Company has lending policies and procedures that provide target market, underwriting and other criteria for identified lending segments to codify the level of credit risk the Company is willing to accept. Approval authority levels are delegated to qualified individuals and approval bodies for the extension of credit within the guidance of these policies and procedures. In addition, the Company maintains an independent loan review department that reviews and validates risk assessment on a continual basis. The Company assigns ratings to borrowers and transactions based on the assessment of a borrower’s ability to service their debt based on relevant information such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. In connection with the adoption of Topic 326 on January 1, 2020, the Company implemented new risk rating models for borrowers and transactions within its commercial loan portfolio. The risk rating methodology transitioned to a dual risk rating framework which bifurcates ratings into probability of default (PD) and loss given default (LGD). Relevant risks are evaluated prior to approving a transaction to determine if the transaction is within the Company’s risk appetite and the appropriate rating. Strong credit analysis requires current, reliable financial information and documented assessment of the customer’s: • ability to perform in accordance with the terms of the credit, including adherence to covenants; • assets and liabilities, liquidity, net worth, and contingent and other off-balance sheet items; • tax liabilities; • cash reserves and ability to convert assets to cash; • income statement and the sources, level, stability, and quality of earnings: • projected performance, sensitized for stressed circumstances; and • industry performance relative to peers and industry. Each commercial credit facility is assigned a PD and LGD rating for the purpose of informing a credit decision, facilitating the determination of the expected level of credit loss and other portfolio management activities (as well as relationship profitability). The dual risk rating framework and risk rating methodologies allow for consistent determination of risk across the Commercial business as indicated by the risk rating assigned. The methodology used by the Bank applies the same criteria for identification of a credit as for the regulatory definitions of risk ratings: Pass - “Pass” assets are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Watch - A “Watch” asset has all the characteristics of a Pass asset but warrants more than the normal level of supervision. These loans may require more detailed reporting to management because some aspects of underwriting may not conform to policy or adverse events may have affected or could affect the cash flow or ability to continue operating profitably, provided, however, the events do not constitute an undue credit risk. Residential and consumer loans delinquent 30 - 59 days are considered watch if not a troubled debt restructuring (“TDR”). 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. Residential and consumer loans delinquent 60 - 89 days are considered special mention if not a TDR. Substandard - A “Substandard” asset is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Residential and consumer loans delinquent 90 days or greater as well as TDRs are considered substandard. Doubtful - An asset classified “Doubtful” has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently known facts, conditions, and values. Loss - An asset or portion thereof, classified “Loss” is considered uncollectible and of such little value that its continuance on the institution’s books as an asset, without establishment of a specific valuation allowance or charge-off, is not warranted. This classification does not necessarily mean that an asset has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery will occur. As such, it is not practical or desirable to defer the write-off. The following table presents the risk category of loans as of June 30, 2020 by class of loan and vintage year: Term Loans by Origination Year 2020 2019 2018 2017 2016 Prior Revolving Loans Total (In thousands) Multi-family Pass $ 365,777 711,763 1,384,829 833,115 1,762,574 1,450,948 9,751 6,518,757 Watch 13,160 21,171 107,311 104,589 149,425 58,043 1,700 455,399 Special mention 4,595 — 7,465 3,310 77,663 55,343 — 148,376 Substandard — — — 9,455 93,115 151,446 1,381 255,397 Total Multi-family 383,532 732,934 1,499,605 950,469 2,082,777 1,715,780 12,832 7,377,929 Commercial real estate Pass 193,001 861,323 765,976 519,365 965,191 985,225 25,409 4,315,490 Watch 10,237 38,913 35,808 31,466 120,624 29,793 1,885 268,726 Special mention — — 2,511 17,993 45,067 44,774 5,534 115,879 Substandard — 1,000 4,649 26,549 52,915 88,145 — 173,258 Total Commercial real estate 203,238 901,236 808,944 595,373 1,183,797 1,147,937 32,828 4,873,353 Commercial and industrial Pass 644,002 709,236 361,615 174,106 413,043 234,237 215,366 2,751,605 Watch 31,947 127,673 56,168 82,914 31,107 31,816 30,133 391,758 Special mention — 26,265 2,616 26,424 28,854 54,555 6,470 145,184 Substandard 3,250 5,511 62,411 4,655 28,456 21,702 14,384 140,369 Total Commercial and industrial 679,199 868,685 482,810 288,099 501,460 342,310 266,353 3,428,916 Construction Pass 20,953 53,744 39,970 — — — 156,408 271,075 Watch 9,523 — — — — — 11,732 21,255 Special mention — — — — — — — — Substandard — — — — — — 12,130 12,130 Total Construction 30,476 53,744 39,970 — — — 180,270 304,460 Residential mortgage Pass 188,712 605,763 592,532 713,647 654,831 1,881,016 — 4,636,501 Watch 112 — 1,048 514 63 7,328 — 9,065 Special mention — — 1,164 312 630 2,234 — 4,340 Substandard — 1,523 2,010 443 839 48,134 102 53,051 Total residential mortgage 188,824 607,286 596,754 714,916 656,363 1,938,712 102 4,702,957 Consumer and other Pass 2,433 8,815 7,170 9,328 13,725 62,461 553,837 657,769 Watch — 134 — — 117 514 10,260 11,025 Special mention — — — — — 177 2,969 3,146 Substandard — — — — 123 1,738 591 2,452 Total Consumer and other 2,433 8,949 7,170 9,328 13,965 64,890 567,657 674,392 Total $ 1,487,702 3,172,834 3,435,253 2,558,185 4,438,362 5,209,629 1,060,042 21,362,007 The following table presents the risk category of loans as of December 31, 2019 by class of loan: Pass Watch Special Mention Substandard Doubtful Loss Total (In thousands) Commercial loans: Multi-family $ 6,326,412 942,438 167,748 376,638 — — 7,813,236 Commercial real estate 4,023,642 489,514 118,426 199,765 — — 4,831,347 Commercial and industrial 2,031,148 693,397 111,389 115,372 — — 2,951,306 Construction 169,236 75,319 — 18,311 — — 262,866 Total commercial loans 12,550,438 2,200,668 397,563 710,086 — — 15,858,755 Residential mortgage 5,074,334 14,414 5,429 50,541 — — 5,144,718 Consumer and other 687,302 9,157 1,174 2,163 — — 699,796 Total $ 18,312,074 2,224,239 404,166 762,790 — — 21,703,269 In the absence of other intervening factors, loans granted payment deferrals related to COVID-19 are not reported as past due or placed on non-accrual status provided the borrowers have met the criteria in the CARES Act or otherwise have met the criteria included in an interagency statement issued by bank regulatory agencies. See Note 1, Summary of Significant Accounting Principles . The following tables present the payment status of the recorded investment in past due loans as of June 30, 2020 and December 31, 2019 by class of loans: June 30, 2020 30-59 Days 60-89 Days Greater than 90 Days Total Past Due Current Total Loans Receivable (In thousands) Commercial loans: Multi-family $ 25,795 19,139 46,970 91,904 7,286,025 7,377,929 Commercial real estate 11,420 3,328 5,143 19,891 4,853,462 4,873,353 Commercial and industrial 7,513 1,178 7,588 16,279 3,412,637 3,428,916 Construction — — — — 304,460 304,460 Total commercial loans 44,728 23,645 59,701 128,074 15,856,584 15,984,658 Residential mortgage 9,835 4,588 31,947 46,370 4,656,587 4,702,957 Consumer and other 11,084 3,147 1,769 16,000 658,392 674,392 Total $ 65,647 31,380 93,417 190,444 21,171,563 21,362,007 December 31, 2019 30-59 Days 60-89 Days Greater than 90 Days Total Past Due Current Total Loans Receivable (In thousands) Commercial loans: Multi-family $ 45,606 1,946 22,055 69,607 7,743,629 7,813,236 Commercial real estate 7,958 525 3,787 12,270 4,819,077 4,831,347 Commercial and industrial 7,774 2,767 5,053 15,594 2,935,712 2,951,306 Construction — — — — 262,866 262,866 Total commercial loans 61,338 5,238 30,895 97,471 15,761,284 15,858,755 Residential mortgage 16,980 6,195 27,729 50,904 5,093,814 5,144,718 Consumer and other 9,157 1,174 1,330 11,661 688,135 699,796 Total $ 87,475 12,607 59,954 160,036 21,543,233 21,703,269 The following table presents non-accrual loans at the date indicated: June 30, 2020 December 31, 2019 # of loans Amount # of loans Amount (Dollars in thousands) Non-accrual: Multi-family 14 $ 48,363 8 $ 23,322 Commercial real estate 22 12,289 22 11,945 Commercial and industrial 29 15,627 18 12,482 Construction — — — — Total commercial loans 65 76,279 48 47,749 Residential mortgage and consumer 255 50,564 260 47,566 Total non-accrual loans 320 $ 126,843 308 $ 95,315 The Company recognized $818,000 of interest income on non-accrual loans during the six months ended June 30, 2020 . Loans which meet certain criteria are individually evaluated as part of the process of calculating the allowance for credit losses. The evaluation is determined on an individual basis using the present value of expected cash flows or the fair value of the collateral as of the reporting date. When management determines that the fair value of collateral securing a collateral dependent loan inadequately covers the balance of net principal, the net principal balance is written down to the fair value of the collateral, net of estimated selling costs as applicable, rather than assigning an allowance. See Note 16, Fair Value Measurements , for information regarding the valuation process for collateral dependent loans. The following table presents individually evaluated collateral-dependent loans by class of loans at the date indicated: June 30, 2020 Real Estate Other Total (Dollars in thousands) Multi-family $ 41,911 — 41,911 Commercial real estate 6,697 — 6,697 Commercial and industrial 4,369 9,711 14,080 Construction — — — Total commercial loans 52,977 9,711 62,688 Residential mortgage and consumer 25,724 114 25,838 Total collateral-dependent loans $ 78,701 9,825 88,526 Included in the non-accrual tables above are TDR loans whose payment status is current, but the Company has classified as non-accrual as the loans have not maintained their current payment status for six consecutive months under the restructured terms and therefore do not meet the criteria for accrual status. As of June 30, 2020 and December 31, 2019 , these loans are comprised of the following: June 30, 2020 December 31, 2019 # of loans Amount # of loans Amount (Dollars in thousands) TDR with payment status current classified as non-accrual: Commercial real estate 2 $ 3,631 2 $ 2,360 Residential mortgage and consumer 33 5,758 25 4,218 Total TDR with payment status current classified as non-accrual 35 $ 9,389 27 $ 6,578 The following table presents TDR loans which were also 30 - 89 days delinquent and classified as non-accrual at the dates indicated: June 30, 2020 December 31, 2019 # of loans Amount # of loans Amount (Dollars in thousands) TDR 30-89 days delinquent classified as non-accrual: Residential mortgage and consumer 8 $ 1,079 18 $ 3,331 Total TDR 30-89 days delinquent classified as non-accrual 8 $ 1,079 18 $ 3,331 The Company has no loans past due 90 days or more delinquent that are still accruing interest. Troubled Debt Restructurings On a case-by-case basis, the Company may agree to modify the contractual terms of a borrower’s loan to remain competitive and assist customers who may be experiencing financial difficulty, as well as preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a TDR. Substantially all of our TDR loan modifications 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, or a combination of these two methods. These modifications rarely result in the forgiveness of principal or accrued interest. In addition, we frequently obtain additional collateral or guarantor support when modifying commercial loans. Restructured loans remain on non-accrual status until there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. Consistent with the CARES Act and interagency guidance which allows temporary relief for current borrowers affected by COVID-19, we are working with borrowers and granting certain modifications through programs related to COVID-19 relief. At June 30, 2020, loans with an aggregate outstanding balance of approximately $4.07 billion have been granted short-term modifications as a result of financial disruptions associated with the COVID-19 pandemic. Also, consistent with the CARES Act and the interagency guidelines, such modifications are not included in our TDR totals and discussion below. For more information on the criteria for classifying loans as TDRs, see Note 1, Summary of Significant Accounting Principles - Section 4013 of the CARES Act and Executive Summary COVID-19 Pandemic. The following tables present the total TDR loans at June 30, 2020 and December 31, 2019 : June 30, 2020 Accrual Non-accrual Total # of loans Amount # of loans Amount # of loans Amount (Dollars in thousands) Commercial loans: Commercial real estate — $ — 2 $ 3,631 2 $ 3,631 Commercial and industrial 3 2,805 2 3,881 5 6,686 Total commercial loans 3 2,805 4 7,512 7 10,317 Residential mortgage and consumer 49 9,347 79 16,491 128 25,838 Total 52 $ 12,152 83 $ 24,003 135 $ 36,155 December 31, 2019 Accrual Non-accrual Total # of loans Amount # of loans Amount # of loans Amount (Dollars in thousands) Commercial loans: Commercial real estate — $ — 3 $ 2,362 3 $ 2,362 Commercial and industrial 3 2,535 2 4,682 5 7,217 Total commercial loans 3 2,535 5 7,044 8 9,579 Residential mortgage and consumer 54 10,549 78 16,458 132 27,007 Total 57 $ 13,084 83 $ 23,502 140 $ 36,586 The following tables present information about TDRs that occurred during the three and six months ended June 30, 2020 and 2019 : Three Months Ended June 30, 2020 2019 Number of Loans Pre-modification Recorded Investment Post- modification Recorded Investment Number of Loans Pre-modification Recorded Investment Post- modification Recorded Investment (Dollars in thousands) Troubled Debt Restructurings: Commercial real estate 1 $ 1,330 $ 1,330 — $ — $ — Residential mortgage and consumer — — — 4 732 732 Six Months Ended June 30, 2020 2019 Number of Loans Pre-modification Recorded Investment Post- modification Recorded Investment Number of Loans Pre-modification Recorded Investment Post- modification Recorded Investment (Dollars in thousands) Troubled Debt Restructurings: Commercial real estate 1 $ 1,330 $ 1,330 — $ — $ — Commercial and industrial 1 933 933 — — — Residential mortgage and consumer — — — 10 2,396 2,396 Post-modification recorded investment represents the net book balance immediately following modification. Collateral dependent loans classified as TDRs were written down to the estimated fair value of the collateral. There were $163,000 in charge-offs for TDRs of unsecured commercial and industrial loans during the three and six months ended June 30, 2020 . There were $96,000 and $573,000 in charge-offs for TDRs of unsecured commercial and industrial loans during the three and six months ended June 30, 2019 , respectively. The allowance for loan losses associated with the TDRs presented in the above tables totaled $1.6 million and $1.8 million as of June 30, 2020 and December 31, 2019 , respectively. Loan modifications generally involve the reduction in loan interest rate and/or extension of loan maturity dates and also may include step up interest rates in their modified terms which will impact their weighted average yield in the future. All residential loans deemed to be TDRs were modified to reflect a reduction in interest rates to current market rates. The commercial loan modification which qualified as a TDR in the three months ended June 30, 2020 was a loan which had already been on non-accrual status and was granted a 90-day deferral of payment due to circumstances related to COVID-19. The commercial loan modification which qualified as a TDR in the first quarter of 2020 had its maturity extended. There were no commercial loan modifications which qualified as TDRs in the six months ended June 30, 2019 . The following tables present information about pre and post modification interest yield for TDRs which occurred during the three and six months ended June 30, 2020 and 2019 : Three Months Ended June 30, 2020 2019 Number of Loans Pre-modification Interest Yield Post- modification Interest Yield Number of Loans Pre-modification Interest Yield Post- modification Interest Yield Troubled Debt Restructurings: Commercial real estate 1 3.88 % 3.88 % — — % — % Residential mortgage and consumer — — % — % 4 5.22 % 4.96 % Six Months Ended June 30, 2020 2019 Number of Loans Pre-modification Interest Yield Post- modification Interest Yield Number of Loans Pre-modification Interest Yield Post- modification Interest Yield Troubled Debt Restructurings: Commercial real estate 1 3.88 % 3.88 % — — % — % Commercial and industrial 1 4.75 % 4.75 % — — % — % Residential mortgage and consumer — — % — % 10 5.25 % 4.92 % Payment defaults for loans modified as a TDR in the previous 12 months to June 30, 2020 consisted of one residential loan with a recorded investment of $201,000 at June 30, 2020 . Payment defaults for loans modified as a TDR in the previous 12 months to June 30, 2019 consisted of one residential loan and one commercial real estate loan with a recorded investment of $270,000 and $2.5 million , respectively, at June 30, 2019 . The following table presents, under previously applicable GAAP, loans individually evaluated for impairment by portfolio segment as of December 31, 2019 : December 31, 2019 Recorded Investment Unpaid Principal Balance Related Allowance Average Recorded Investment Interest Income Recognized (In thousands) With no related allowance: Multi-family $ 22,169 23,581 — 23,298 47 Commercial real estate 7,875 10,913 — 8,127 199 Commercial and industrial 12,476 21,090 — 14,860 351 Construction — — — — — Total commercial loans 43 56 — 46 1 Residential mortgage and consumer 13,783 18,066 — 13,811 267 With an allowance recorded: Multi-family — — — — — Commercial real estate — — — — — Commercial and industrial — — — — — Construction — — — — — Total commercial loans — — — — — Residential mortgage and consumer 13,220 13,881 1,763 13,321 153 Total: Multi-family 22,169 23,581 — 23,298 47 Commercial real estate 7,875 10,913 — 8,127 199 Commercial and industrial 12,476 21,090 — 14,860 351 Construction — — — — — Total commercial loans 43 56 — 46 1 Residential mortgage and consumer 27,003 31,947 1,763 27,132 420 Total impaired loans $ 69,523 87,531 1,763 73,417 1,017 The average recorded investment is the annual average calculated based upon the ending quarterly balances. The interest income recognized is the year to date interest income recognized on a cash basis. |
