(5) Loans Receivable, Net

A summary of loans receivable at December 31, 2015 and 2014 follows (in thousands):


	December 31,
	2015			2014
Real estate mortgage:
One-to-four family	$	791,249		$	737,889
Commercial real estate, multi-family and land		818,234			649,951
Residential construction		50,757			47,552

		1,660,240			1,435,392
Consumer		193,160			199,349
Commercial and industrial		144,538			83,946

Total loans		1,997,938			1,718,687

Purchased credit-impaired (“PCI”) loans		461			—
Loans in process		(14,206	)		(16,731	)
Deferred origination costs, net		3,232			3,207
Allowance for loan losses		(16,722	)		(16,317	)

		(27,235	)		(29,841	)

Loans receivable, net	$	1,970,703		$	1,688,846

The Bank’s eligible mortgage loans are pledged to secure FHLB advances.

At December 31, 2015, 2014 and 2013, loans in the amount of $18.3 million, $18.3 million, and $45.4 million, respectively, were three or more months delinquent or in the process of foreclosure and the Company was not accruing interest income on these loans and has reversed previously accrued interest. There were no loans ninety days or greater past due and still accruing interest. Non-accrual loans include both smaller balance homogenous loans that are collectively evaluated for impairment and individually classified impaired loans.

The recorded investment in mortgage and consumer loans collateralized by residential real estate which are in the process of foreclosure amounted to $2.0 million, at December 31, 2015. The amount of foreclosed residential real estate property held by the Company was $1.8 million at December 31, 2015.

The Company defines an impaired loan as all non-accrual commercial real estate, multi-family, land, construction and commercial and industrial loans in excess of $250,000. Impaired loans also include all loans modified as troubled debt restructurings. At December 31, 2015, the impaired loan portfolio totaled $38.4 million, for which there was a specific allocation in the allowance for loan losses of $1.3 million. At December 31, 2014, the impaired loan portfolio totaled $37.0 million, for which there was a specific allocation in the allowance for loan losses of $2.2 million. The average balance of impaired loans for the years ended December 31, 2015, 2014 and 2013 was $41.5 million, $41.0 million, and $38.6 million, respectively. If interest income on non-accrual loans and impaired loans had been current in accordance with their original terms, approximately $848,000, $1.6 million, and $2.5 million of interest income for the years ended December 31, 2015, 2014 and 2013, respectively, would have been recorded. At December 31, 2015, there were no commitments to lend additional funds to borrowers whose loans are in non-accrual status.

An analysis of the allowance for loan losses for the years ended December 31, 2015, 2014 and 2013 is as follows (in thousands):


	Years Ended December 31,
	2015			2014			2013
Balance at beginning of year	$	16,317		$	20,930		$	20,510
Provision charged to operations		1,275			2,630			2,800
Charge-offs		(1,135	)		(7,827	)		(3,521	)
Recoveries		265			584			1,141

Balance at end of year	$	16,722		$	16,317		$	20,930

The following table presents an analysis of the allowance for loan losses for the years ended December 31, 2015 and 2014, the balance in the allowance for loan loses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2015 and 2014 excluding PCI loans (in thousands):


	Residential Real Estate			Commercial Real Estate			Consumer			Commercial and Industrial			Unallocated			Total
For the year ended December 31, 2015
Allowance for loan losses:
Balance at beginning of year	$	4,291		$	8,935		$	1,146		$	863		$	1,082		$	16,317
Provision (benefit) charged to operations		2,465			(1,696	)		529			826			(849	)		1,275
Charge-offs		(295	)		(103	)		(678	)		(59	)		—			(1,135	)
Recoveries		129			29			98			9			—			265

Balance at end of year	$	6,590		$	7,165		$	1,095		$	1,639		$	233		$	16,722

For the year ended December 31, 2014
Allowance for loan losses:
Balance at beginning of year	$	4,859		$	10,371		$	1,360		$	1,383		$	2,957		$	20,930
Provision (benefit) charged to operations		5,862			(1,122	)		211			(446	)		(1,875	)		2,630
Charge-offs		(6,955	)		(323	)		(471	)		(78	)		—			(7,827	)
Recoveries		525			9			46			4			—			584

Balance at end of year	$	4,291		$	8,935		$	1,146		$	863		$	1,082		$	16,317

December 31, 2015
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	31		$	831		$	43		$	434		$	—		$	1,339
Collectively evaluated for impairment		6,559			6,334			1,052			1,205			233			15,383

Total ending allowance balance	$	6,590		$	7,165		$	1,095		$	1,639		$	233		$	16,722

Loans:
Loans individually evaluated for impairment	$	13,165		$	21,650		$	2,307		$	1,250		$	—		$	38,372
Loans collectively evaluated for impairment		828,841			796,584			190,853			143,288			—			1,959,566

Total ending loan balance	$	842,006		$	818,234		$	193,160		$	144,538		$	—		$	1,997,938

December 31, 2014
Allowance for loan losses:
Ending allowance balance attributed to loans:
Individually evaluated for impairment	$	88		$	1,741		$	332		$	—		$	—		$	2,161
Collectively evaluated for impairment		4,203			7,194			814			863			1,082			14,156

Total ending allowance balance	$	4,291		$	8,935		$	1,146		$	863		$	1,082		$	16,317

Loans:
Loans individually evaluated for impairment	$	12,879		$	21,165		$	2,221		$	714		$	—		$	36,979
Loans collectively evaluated for impairment		772,562			628,786			197,128			83,232			—			1,681,708

Total ending loan balance	$	785,441		$	649,951		$	199,349		$	83,946		$	—		$	1,718,687

A summary of impaired loans at December 31, 2015 and 2014 is as follows, excluding PCI loans (in thousands):


	December 31,
	2015		2014
Year-end impaired loans with no allocated allowance for loan losses	$	35,177	$	26,487
Year-end impaired loans with allocated allowance for loan losses		3,195		10,492

	$	38,372	$	36,979

Amount of the allowance for loan losses allocated	$	1,339	$	2,161

At December 31, 2015, impaired loans include troubled debt restructuring loans of $31.3 million, of which $26.3 million were performing in accordance with their restructured terms and were accruing interest. At December 31, 2014, impaired loans include troubled debt restructuring loans of $23.5 million of which $21.5 million were performing in accordance with their restructured terms and were accruing interest.

The summary of loans individually evaluated for impairment by loan portfolio segment as of December 31, 2015 and 2014 and for the years ended December 31, 2015 and 2014 follows, excluding PCI loans (in thousands):


	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
As of December 31, 2015
With no related allowance recorded:
Residential real estate	$	13,431	$	13,056	$	—
Commercial real estate		19,240		19,154
Consumer		2,577		2,264		—
Commercial and industrial		703		703		—

	$	35,951	$	35,177	$	—

With an allowance recorded:
Residential real estate	$	109	$	109	$	31
Commercial real estate		2,447		2,496		831
Consumer		81		43		43
Commercial and industrial		547		547		434

	$	3,184	$	3,195	$	1,339


	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
As of December 31, 2014
With no related allowance recorded:
Residential real estate	$	12,351	$	11,931	$	—
Commercial real estate		12,174		12,142		—
Consumer		2,243		1,700		—
Commercial and industrial		714		714		—

	$	27,482	$	26,487	$	—

With an allowance recorded:
Residential real estate	$	948	$	948	$	88
Commercial real estate		9,023		9,023		1,741
Consumer		521		521		332
Commercial and industrial		—		—		—

	$	10,492	$	10,492	$	2,161


	For the years ended of December 31,
	2015				2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Residential real estate	$	12,844	$	585	$	16,253	$	662
Commercial real estate		16,328		462		11,472		384
Consumer		2,183		123		1,982		96
Commercial and industrial		705		8		386		10

	$	32,060	$	1,178	$	30,093	$	1,152

With an allowance recorded:
Residential real estate	$	110	$	3	$	990	$	59
Commercial real estate		8,956		10		9,348		77
Consumer		42		2		592		48
Commercial and industrial		365		2		—		—

	$	9,473	$	17	$	10,930	$	184

The following table presents the recorded investment in non-accrual loans by loan portfolio segment as of December 31, 2015 and 2014, excluding PCI loans (in thousands).


	December 31,
	2015		2014
Residential real estate	$	5,779	$	3,115
Commercial real estate		10,796		12,758
Consumer		1,576		1,877
Commercial and industrial		123		557

	$	18,274	$	18,307

The following table presents the aging of the recorded investment in past due loans as of December 31, 2015 and 2014 by loan portfolio segment, excluding PCI loans (in thousands):


	30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Loans Not Past Due		Total
December 31, 2015
Residential real estate	$	4,075	$	2,716	$	3,168	$	9,959	$	832,047	$	842,006
Commercial real estate		297		1,208		10,333		11,838		806,396		818,234
Consumer		1,661		115		1,248		3,024		190,136		193,160
Commercial and industrial		8		—		360		368		144,170		144,538

	$	6,041	$	4,039	$	15,109	$	25,189	$	1,972,749	$	1,997,938

December 31, 2014
Residential real estate	$	7,365	$	1,695	$	1,619	$	10,679	$	774,762	$	785,441
Commercial real estate		119		—		12,758		12,877		637,074		649,951
Consumer		845		232		1,833		2,910		196,439		199,349
Commercial and industrial		—		—		557		557		83,389		83,946

	$	8,329	$	1,927	$	16,767	$	27,023	$	1,691,664	$	1,718,687

The Company categorizes all commercial and industrial, and commercial real estate loans, except for small business loans, into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation and current economic trends, among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.

Substandard. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as 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.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be Pass rated loans. Loans not rated are included in groups of homogeneous loans. As of December 31, 2015 and 2014, and based on the most recent analysis performed, the risk category of loans by loan portfolio segment is as follows, excluding PCI loans (in thousands):


	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2015
Commercial real estate	$	783,365	$	12,070	$	22,799	$	—	$	818,234
Commercial and industrial		142,387		787		1,364		—		144,538

	$	925,752	$	12,857	$	24,163	$	—	$	962,772

December 31, 2014
Commercial real estate	$	611,987	$	12,684	$	25,280	$	—	$	649,951
Commercial and industrial		82,693		173		1,080		—		83,946

	$	694,680	$	12,857	$	26,360	$	—	$	733,897

For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans based on payment activity as of December 31, 2015 and 2014, excluding PCI loans (in thousands):


	Residential Real Estate
	Residential		Consumer
December 31, 2015
Performing	$	836,227	$	191,584
Non-performing		5,779		1,576

	$	842,006	$	193,160

December 31, 2014
Performing	$	782,326	$	197,472
Non-performing		3,115		1,877

	$	785,441	$	199,349

The Company classifies certain loans as troubled debt restructurings (“TDR”) when credit terms to a borrower in financial difficulty are modified. The modifications may include a reduction in rate, an extension in term and/or the capitalization of past due amounts. One-to-four family and consumer loans where the borrower’s debt is discharged in a bankruptcy filing are also considered troubled debt restructurings. For these loans, the Bank retains its security interest in the real estate collateral. Included in the non-accrual loan total at December 31, 2015, 2014 and 2013 were $4.9 million, $2.0 million, and $9.7 million, respectively, of troubled debt restructurings. At December 31, 2015, 2014 and 2013, the Company has allocated $262,000, $419,000, and $1.8 million, respectively, of specific reserves to loans which are classified as troubled debt restructurings. Non-accrual loans which become troubled debt restructurings are generally returned to accrual status after six months of performance. In addition to the troubled debt restructurings included in non-accrual loans, the Company also has loans classified as troubled debt restructuring which are accruing at December 31, 2015, 2014 and 2013 which totaled $26.3 million, $21.5 million, and $21.5 million, respectively. In the second quarter of 2015, the Bank restructured a commercial real estate loan with an outstanding balance of $3.9 million by extending the term and lowering the monthly repayment amount. The interest rate was unchanged. All troubled debt restructurings, regardless of payment status, are considered impaired loans and are individually evaluated as part of the determination of the allowance for loan losses.

The following table presents information about troubled debt restructurings which occurred during the years ended December 31, 2015 and 2014, and troubled debt restructurings modified within the previous year and which defaulted during the years ended December 31, 2015 and 2014 (dollars in thousands):


	Number of Loans		Pre-modification Recorded Investment		Post-modification Recorded Investment
Year ended December 31, 2015
Troubled Debt Restructurings:
Residential real estate		5	$	2,029	$	1,966
Commercial real estate		4		6,095		6,007
Consumer		9		599		547

	Number of Loans		Recorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:		None		None

	Number of Loans		Pre-modification Recorded Investment		Post-modification Recorded Investment
Year ended December 31, 2014
Troubled Debt Restructurings:
Residential real estate		10	$	2,313	$	1,901
Consumer		10		234		178

	Number of Loans		Recorded Investment
Troubled Debt Restructurings
Which Subsequently Defaulted:
Consumer		1	$	40

As part of the Colonial acquisition PCI loans were acquired at a discount primarily due to deteriorated credit quality. PCI loans are accounted for at fair value, based upon the present value of expected future cash flows, with no related allowance for loan losses.

The following table presents information regarding the estimates of the contractually required payments, the cash flows expected to be collected and the estimated fair value of the PCI loans acquired from Colonial at July 31, 2015 (in thousands):


	July 31, 2015
Contractually required principal and interest	$	1,610
Contractual cash flows not expected to be collected (non-accretable discount)		(1,049	)

Expected cash flows to be collected at acquisition		561
Interest component of expected cash flows (accretable yield)		(91	)

Fair value of acquired loans	$	470

The following table summarizes the changes in accretable yield for PCI loans during the year ended December 31, 2015 (in thousands):


	For the year ended December 31, 2015
Beginning balance	$	—
Acquisition		91
Accretion		(16	)
Reclassification from non-accretable difference		—

Ending balance	$	75