Loans Receivable and Allowance for Loan Losses

Loans receivable at June 30, 2019 and December 31, 2018 are summarized as follows:



	June 30,		December 31,
	2019		2018
	(In thousands)
Real estate loans:
One-to-four family	$	1,819,539	$	1,830,186
Multifamily and commercial	2,248,300		2,142,154
Construction	293,550		261,473
Commercial business loans	358,620		333,876
Consumer loans:
Home equity loans and advances	375,124		393,492
Other consumer loans	1,124		1,108
Total gross loans	5,096,257		4,962,289
Net deferred loan costs, fees and purchased premiums and discounts	16,917		16,893
Loans receivable	$	5,113,174	$	4,979,182

The Company had $2.0 million and $8.1 million of one-to-four family real estate loans held-for-sale at June 30, 2019 and December 31, 2018, respectively. During the three and six months ended June 30, 2019, the Company sold one-to-four family real estate loans held-for-sale totaling $27.6 million and $45.0 million, respectively. These sales resulted in gross gains of $196,000 and $328,000, respectively, and no gross losses. No gross gains or losses were recognized on loans held-for-sale during the three and six months ended June 30, 2018.

During the three and six months ended June 30, 2019 the Company sold $2.5 million of one-to-four family and home equity loans included in loans receivable. No gross gains or losses were recognized on the sale of these loans. During both the three and six months ended June 30, 2018, the Company sold $3.7 million of loans receivable. These sales of one-to-four family real estate loans to a third party resulted in gross gains of $15,000 and no gross losses.

During the three and six months ended June 30, 2019, the Company purchased $2.6 million and $5.0 million, respectively, of one-to-four family real estate loans from third parties. During the three and six months ended June 30, 2019, the Company purchased $24.9 million of commercial real estate loans from third parties. The Company purchased $2.6 million of one-to-four family real estate loans and $2.1 million of commercial real estate loans from third parties during the three and six months ended June 30, 2018.

At June 30, 2019 and December 31, 2018, the carrying value of loans serviced by the Company for investors was $503.9 million and $462.7 million, respectively.

The Company periodically enters into Guarantor Swaps with Freddie Mac which results in improved liquidity. During the three and six months ended June 30, 2019, the Company securitized $15.6 million and $21.6 million, respectively of loans for a Freddie Mac Mortgage Participation Certificate. The Company retained the servicing of these loans. No loans were sold to Freddie Mac in exchange for Freddie Mac Mortgage Participation Certificates during the three and six months ended June 30, 2018.

8. Loans Receivable and Allowance for Loan Losses (continued)

The following tables summarize the aging of loans receivable by portfolio segment at June 30, 2019 and December 31, 2018:



	June 30, 2019
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current		Total
	(In thousands)
Real estate loans:
One-to-four family	$	8,246	$	799	$	2,420	$	11,465	$	1,808,074	$	1,819,539
Multifamily and commercial	—		1,396		451		1,847		2,246,453		2,248,300
Construction	—		1,700		—		1,700		291,850		293,550
Commercial business loans	126		534		689		1,349		357,271		358,620
Consumer loans:
Home equity loans and advances	898		1,097		389		2,384		372,740		375,124
Other consumer loans	—		—		—		—		1,124		1,124
Total loans	$	9,270	$	5,526	$	3,949	$	18,745	$	5,077,512	$	5,096,257



	December 31, 2018
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current		Total
	(In thousands)
Real estate loans:
One-to-four family	$	8,384	$	1,518	$	819	$	10,721	$	1,819,465	$	1,830,186
Multifamily and commercial	1,870		1,425		154		3,449		2,138,705		2,142,154
Construction	—		—		—		—		261,473		261,473
Commercial business loans	208		279		911		1,398		332,478		333,876
Consumer loans:
Home equity loans and advances	1,550		173		905		2,628		390,864		393,492
Other consumer loans	—		—		—		—		1,108		1,108
Total loans	$	12,012	$	3,395	$	2,789	$	18,196	$	4,944,093	$	4,962,289

The Company considers a loan to be delinquent when we have not received a payment within 30 days of its contractual due date. Generally, a loan is designated as a non-accrual loan when the payment of interest is 90 days or more in arrears of its contractual due date. Non-accruing loans are returned to accrual status after there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible. The Company identifies loans that may need to be charged-off as a loss, by reviewing all delinquent loans, classified loans and other loans that management may have concerns about collectability. At June 30, 2019 and December 31, 2018, non-accrual loans totaled $6.7 million and $2.8 million, respectively. Included in non-accrual loans at June 30, 2019, are nine loans totaling $2.7 million which are less than 90 days in arrears. This includes three loans to one borrower totaling $2.4 million that were identified as having circumstances that indicate a concern regarding continued collectability. At December 31, 2018, no loans less than 90 days in arrears were included in non-accrual loans.

At June 30, 2019 and December 31, 2018, there were no loans past due 90 days or more and still accruing interest.

8. Loans Receivable and Allowance for Loan Losses (continued)

The following table provides information with respect to our non-accrual loans at June 30, 2019 and December 31, 2018:



	June 30,		December 31,
	2019		2018
	(In thousands)
Non-accrual loans:
Real estate loans:
One-to-four family	$	2,567	$	819
Multifamily and commercial	451		154
Construction	1,700		—
Commercial business loans	1,384		911
Consumer loans:
Home equity loans and advances	592		905
Total non-accrual loans	$	6,694	$	2,789

We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. At June 30, 2019, the Company had no real estate owned. At December 31, 2018, we held one single-family property in real estate owned with a carrying value of $92,000 that was acquired through foreclosure on a residential mortgage loan. At June 30, 2019 and December 31, 2018, we had 5 and 14 residential mortgage loans with carrying values of $1.0 million and $1.6 million, respectively, collateralized by residential real estate which are in the process of foreclosure.

The following tables summarize loans receivable and allowance for loan losses by portfolio segment and impairment method at June 30, 2019 and December 31, 2018:



	June 30, 2019
	One-to-Four Family		Multifamily and Commercial		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	520	$	2	$	372	$	404	$	11	$	—	$	—	$	1,309
Collectively evaluated for impairment	15,090		22,677		8,434		12,314		2,572		7		—		61,094
Total	$	15,610	$	22,679	$	8,806	$	12,718	$	2,583	$	7	$	—	$	62,403

Total loans:
Individually evaluated for impairment	$	8,414	$	2,648	$	1,700	$	7,822	$	2,550	$	—	$	—	$	23,134
Collectively evaluated for impairment	1,811,125		2,245,652		291,850		350,798		372,574		1,124		—		5,073,123
Total loans	$	1,819,539	$	2,248,300	$	293,550	$	358,620	$	375,124	$	1,124	$	—	$	5,096,257

8. Loans Receivable and Allowance for Loan Losses (continued)



	December 31, 2018
	One-to-Four Family		Multifamily and Commercial		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Unallocated		Total
	(In thousands)
Allowance for loan losses:
Individually evaluated for impairment	$	537	$	—	$	—	$	366	$	12	$	—	$	—	$	915
Collectively evaluated for impairment	14,695		23,251		7,217		13,810		2,446		8		—		61,427
Total	$	15,232	$	23,251	$	7,217	$	14,176	$	2,458	$	8	$	—	$	62,342

Total loans:
Individually evaluated for impairment	$	9,048	$	2,695	$	—	$	2,944	$	3,100	$	—	$	—	$	17,787
Collectively evaluated for impairment	1,821,138		2,139,459		261,473		330,932		390,392		1,108		—		4,944,502
Total loans	$	1,830,186	$	2,142,154	$	261,473	$	333,876	$	393,492	$	1,108	$	—	$	4,962,289

Loan modifications to borrowers experiencing financial difficulties that are considered troubled debt restructurings ("TDRs") primarily involve the lowering of 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 without a corresponding adjustment to the risk premium reflected in the interest rate, or a combination of these two methods. These modifications generally do not result in the forgiveness of principal or accrued interest. In addition, the Company attempts to obtain additional collateral or guarantor support when modifying such loans. Non-accruing restructured loans may be returned to accrual status when there has been a sustained period of repayment performance (generally six consecutive months of payments) and both principal and interest are deemed collectible.

8. Loans Receivable and Allowance for Loan Losses (continued)

The following tables present the number of loans modified as TDRs during the three and six months ended June 30, 2019 and 2018, along with their balances immediately prior to the modification date and post-modification. Post-modification recorded investment represents the net book balance immediately following modification.



	For the Three Months Ended June 30,
	2019					2018
	No. of Loans	Pre-modification Recorded Investment		Post-modification Recorded Investment		No. of Loans	Pre-modification Recorded Investment		Pre-modification Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Real estate loans:
One-to-four family	—	$	—	$	—	3	$	378	$	378
Total restructured loans	—	$	—	$	—	3	$	378	$	378



	For the Six Months Ended June 30,
	2019					2018
	No. of Loans	Pre-modification Recorded Investment		Post-modification Recorded Investment		No. of Loans	Pre-modification Recorded Investment		Pre-modification Recorded Investment
	(Dollars in thousands)
Troubled Debt Restructurings
Real estate loans:
One-to-four family	—	$	—	$	—	4	$	462	$	462
Commercial business loans	1	4,095		4,095		—	—		—
Consumer loans:
Home equity loans and advances	—	—		—		1	588		588
Total restructured loans	1	$	4,095	$	4,095	5	$	1,050	$	1,050

8. Loans Receivable and Allowance for Loan Losses (continued)

The activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019 and 2018 are as follows:



	For the Three Months Ended June 30,
	One-to-Four Family			Multifamily and Commercial		Construction			Commercial Business			Home Equity Loans and Advances			Other Consumer Loans			Unallocated			Total
	(In thousands)
2019
Balance at beginning of period	$	17,375		$	20,986	$	9,033		$	12,225		$	3,146		$	6		$	—		$	62,771
Provision charged (credited)	(1,254		)	1,693		(228		)	441			(542		)	2			—			112
Recoveries	4			—		1			53			—			—			—			58
Charge-offs	(515		)	—		—			(1		)	(21		)	(1		)	—			(538		)
Balance at end of period	$	15,610		$	22,679	$	8,806		$	12,718		$	2,583		$	7		$	—		$	62,403

2018
Balance at beginning of period	$	18,828		$	19,097	$	6,574		$	10,800		$	3,924		$	7		$	722		$	59,952
Provision charged (credited)	(324		)	3,705		154			87			(1,153		)	5			(74		)	2,400
Recoveries	51			—		—			36			99			3			—			189
Charge-offs	(6		)	—		—			(3		)	—			(8		)	—			(17		)
Balance at end of period	$	18,549		$	22,802	$	6,728		$	10,920		$	2,870		$	7		$	648		$	62,524

8. Loans Receivable and Allowance for Loan Losses (continued)



	For the Six Months Ended June 30,
	One-to-Four Family			Multifamily and Commercial			Construction		Commercial Business			Home Equity Loans and Advances			Other Consumer Loans			Unallocated		Total
	(In thousands)
2019
Balance at beginning of period	$	15,232		$	23,251		$	7,217	$	14,176		$	2,458		$	8		$	—	$	62,342
Provision charged (credited)	868			(572		)	1,588		(1,555		)	219			—			—		548
Recoveries	25			—			1		366			7			—			—		399
Charge-offs	(515		)	—			—		(269		)	(101		)	(1		)	—		(886		)
Balance at end of period	$	15,610		$	22,679		$	8,806	$	12,718		$	2,583		$	7		$	—	$	62,403

2018
Balance at beginning of period	$	19,991		$	19,933		$	5,217	$	8,275		$	4,577		$	8		$	177	$	58,178
Provision charged (credited)	(1,552		)	2,998			1,508		2,783			(1,810		)	2			471		4,400
Recoveries	171			—			3		87			103			5			—		369
Charge-offs	(61		)	(129		)	—		(225		)	—			(8		)	—		(423		)
Balance at end of period	$	18,549		$	22,802		$	6,728	$	10,920		$	2,870		$	7		$	648	$	62,524

8. Loans Receivable and Allowance for Loan Losses (continued)

The following tables present loans individually evaluated for impairment by loan segment at June 30, 2019 and December 31, 2018:



	At June 30, 2019
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family	$	3,657	$	4,802	$	—
Multifamily and commercial	1,528		2,315		—
Commercial business loans	2,616		2,803		—
Consumer loans:
Home equity loans and advances	1,427		1,781		—
	9,228		11,701		—
With a specific allowance recorded:
Real estate loans:
One-to-four family	4,757		4,807		520
Multifamily and commercial	1,120		1,120		2
Construction	1,700		1,700		372
Commercial business loans	5,206		5,206		404
Consumer loans:
Home equity loans and advances	1,123		1,124		11
	13,906		13,957		1,309
Total:
Real estate loans:
One-to-four family	8,414		9,609		520
Multifamily and commercial	2,648		3,435		2
Construction	1,700		1,700		372
Commercial business loans	7,822		8,009		404
Consumer loans:
Home equity loans and advances	2,550		2,905		11
Total loans	$	23,134	$	25,658	$	1,309

8. Loans Receivable and Allowance for Loan Losses (continued)



	At December 31, 2018
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family	$	4,156	$	5,307	$	—
Multifamily and commercial	2,695		3,482		—
Commercial business loans	2,285		2,374		—
Consumer loans:
Home equity loans and advances	2,511		2,866		—
	11,647		14,029		—
With a specific allowance recorded:
Real estate loans:
One-to-four family	4,892		4,939		537
Commercial business loans	659		768		366
Consumer loans:
Home equity loans and advances	589		589		12
	6,140		6,296		915
Total:
Real estate loans:
One-to-four family	9,048		10,246		537
Multifamily and commercial	2,695		3,482		—
Commercial business loans	2,944		3,142		366
Consumer loans:
Home equity loans and advances	3,100		3,455		12
	$	17,787	$	20,325	$	915

Specific allocations of the allowance for loan losses attributable to impaired loans totaled $1.3 million and $915,000 at June 30, 2019 and December 31, 2018, respectively. At June 30, 2019 and December 31, 2018, impaired loans for which there was no related allowance for loan losses totaled $9.2 million and $11.6 million, respectively.

The recorded investment in TDRs totaled $19.5 million at June 30, 2019, of which one loan totaling $436,000 was 30-59 days past due. The remaining loans modified were current at the time of restructuring and have complied with the terms of their restructure agreement at June 30, 2019. The recorded investment in TDRs totaled $16.0 million at December 31, 2018, of which one loan totaling $101,000 was over 90 days past due, and seven loans totaling $1.0 million were 30-59 days past due. The remaining loans modified were current at the time of restructuring and have complied with the terms of their restructure agreement at December 31, 2018.

8. Loans Receivable and Allowance for Loan Losses (continued)

The following tables present interest income recognized for loans individually evaluated for impairment, by loan segment, for the three and six months ended June 30, 2019 and 2018:



	For the Three Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Real estate loans:
One-to-four family	$	8,611	$	108	$	10,715	$	103
Multifamily and commercial	2,666		37		2,718		30
Construction	1,700		—		—		—
Commercial business loans	6,616		98		3,180		25
Consumer loans:
Home equity loans and advances	2,699		47		3,260		39
Total loans	$	22,292	$	290	$	19,873	$	197



	For the Six Months Ended June 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Real estate loans:
One-to-four family	$	9,149	$	214	$	11,025	$	103
Multifamily and commercial	2,681		74		3,043		28
Construction	1,133		25		—		—
Commercial business loans	5,430		178		3,541		25
Consumer loans:
Home equity loans and advances	2,920		99		3,037		38
Total loans	$	21,313	$	590	$	20,646	$	194

The Company utilizes an eight-point risk rating system to summarize its loan portfolio into categories with similar risk characteristics. Loans deemed to be “acceptable quality” are rated 1 through 4 (Pass), with a rating of 1 established for loans with minimal risk. Loans that are deemed to be of “questionable quality” are rated 5 (Special Mention) or 6 (Substandard). Loans with adverse classifications are rated 7 (Doubtful) or 8 (Loss). The risk ratings are also confirmed through periodic loan review examinations which are currently performed by both an independent third-party and the Company's credit risk review department. The Company requires an annual review be performed above certain dollar thresholds, depending on loan type, to help determine the appropriate risk ratings. Results from examinations are presented to the Audit Committee of the Board of Directors.

8. Loans Receivable and Allowance for Loan Losses (continued)

The following tables present loans receivable by credit risk indicator and by loan segment:



	At June 30, 2019
	One-to-Four Family		Multifamily and Commercial		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Total
	(In thousands)

Pass	$	1,815,526	$	2,234,349	$	291,850	$	342,966	$	374,025	$	1,124	$	5,059,840
Special mention	—		89		—		11,109		—		—		11,198
Substandard	4,013		13,862		1,700		4,545		1,099		—		25,219
Doubtful	—		—		—		—		—		—		—
Total	$	1,819,539	$	2,248,300	$	293,550	$	358,620	$	375,124	$	1,124	$	5,096,257



	December 31, 2018
	One-to-Four Family		Multifamily and Commercial		Construction		Commercial Business		Home Equity Loans and Advances		Other Consumer Loans		Total
	(In thousands)

Pass	$	1,826,066	$	2,128,680	$	261,473	$	320,451	$	392,092	$	1,108	$	4,929,870
Special mention	—		—		—		9,074		—		—		9,074
Substandard	4,120		13,474		—		4,351		1,400		—		23,345
Doubtful	—		—		—		—		—		—		—
Total	$	1,830,186	$	2,142,154	$	261,473	$	333,876	$	393,492	$	1,108	$	4,962,289