Loans Receivable and Allowance for Loan Losses

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



	September 30,		December 31,
	2019		2018
	(In thousands)
Real estate loans:
One-to-four family	$	1,844,507	$	1,830,186
Multifamily and commercial	2,316,922		2,142,154
Construction	268,522		261,473
Commercial business loans	375,412		333,876
Consumer loans:
Home equity loans and advances	362,432		393,492
Other consumer loans	1,681		1,108
Total gross loans	5,169,476		4,962,289
Net deferred loan costs, fees and purchased premiums and discounts	16,621		16,893
Loans receivable	$	5,186,097	$	4,979,182

The Company had no loans held-for-sale at September 30, 2019, and $8.1 million of one-to-four family real estate loans held-for-sale at December 31, 2018. During the three and nine months ended September 30, 2019, the Company sold one-to-four family real estate loans held-for-sale totaling $49.1 million and $94.1 million, respectively. These sales resulted in gross gains of $382,000 and $710,000, respectively, and no gross losses. No gross gains or losses were recognized on loans held-for-sale during the three and nine months ended September 30, 2018.

During the three and nine months ended September 30, 2019 the Company sold $2.3 million and $4.8 million, respectively 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. For the three and nine months ended September 30, 2019, the Company sold $5.5 million of commercial real estate loans included in loans receivable. No gross gains or losses were recognized on the commercial real estate loans sold during the three and nine months ended September 30, 2019. During both the three and nine months ended September 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.

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

During the three months ended September 30, 2019, there were no loans purchased by the Company. During the nine months ended September 30, 2019, the Company purchased $5.0 million, of one-to-four family real estate loans and $24.9 million of commercial real estate loans from third parties. There were no loans purchased by the Company during the three months ended September 30, 2018. 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 nine months ended September 30, 2018.

At September 30, 2019 and December 31, 2018, the carrying value of loans serviced by the Company for investors was $538.2 million and $462.7 million, respectively.

The Company periodically enters into Guarantor Swaps with Freddie Mac which results in improved liquidity. During the three months ended September 30, 2019, no loans were securitized. During the nine months ended September 30, 2019, the Company securitized $21.6 million 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 nine months ended September 30, 2018.

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



	September 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	$	5,326	$	1,958	$	1,647	$	8,931	$	1,835,576	$	1,844,507
Multifamily and commercial	439		114		603		1,156		2,315,766		2,316,922
Construction	—		—		—		—		268,522		268,522
Commercial business loans	—		—		1,129		1,129		374,283		375,412
Consumer loans:
Home equity loans and advances	740		537		485		1,762		360,670		362,432
Other consumer loans	—		—		—		—		1,681		1,681
Total loans	$	6,505	$	2,609	$	3,864	$	12,978	$	5,156,498	$	5,169,476



	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

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

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 September 30, 2019 and December 31, 2018, non-accrual loans totaled $4.3 million and $2.8 million, respectively. Included in non-accrual loans at September 30, 2019, are seven loans totaling $433,000 which are less than 90 days in arrears. At December 31, 2018, no loans less than 90 days in arrears were included in non-accrual loans.

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

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



	September 30,		December 31,
	2019		2018
	(In thousands)
Non-accrual loans:
Real estate loans:
One-to-four family	$	1,799	$	819
Multifamily and commercial	603		154
Commercial business loans	1,195		911
Consumer loans:
Home equity loans and advances	700		905
Total non-accrual loans	$	4,297	$	2,789

We may obtain physical possession of real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. At September 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 September 30, 2019 and December 31, 2018, we had 5 and 14 residential mortgage loans with carrying values of $866,000 and $1.6 million, respectively, collateralized by residential real estate which are in the process of foreclosure.

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

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



	September 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	$	507	$	2	$	—	$	607	$	14	$	—	$	—	$	1,130
Collectively evaluated for impairment	15,226		22,967		7,760		13,421		2,117		8		—		61,499
Total	$	15,733	$	22,969	$	7,760	$	14,028	$	2,131	$	8	$	—	$	62,629

Total loans:
Individually evaluated for impairment	$	9,131	$	2,624	$	—	$	7,099	$	2,706	$	—	$	—	$	21,560
Collectively evaluated for impairment	1,835,376		2,314,298		268,522		368,313		359,726		1,681		—		5,147,916
Total loans	$	1,844,507	$	2,316,922	$	268,522	$	375,412	$	362,432	$	1,681	$	—	$	5,169,476

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)

There were no loans modified during the three months ended September 30, 2019 and 2018. The following table presents the number of loans modified as TDRs during the nine months ended September 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 Nine Months Ended September 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

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



	For the Three Months Ended September 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	$	15,610		$	22,679	$	8,806		$	12,718		$	2,583		$	7		$	—		$	62,403
Provision charged (credited)	347			290		(1,047		)	2,040			(474		)	1			—			1,157
Recoveries	4			—		1			8			22			—			—			35
Charge-offs	(228		)	—		—			(738		)	—			—			—			(966		)
Balance at end of period	$	15,733		$	22,969	$	7,760		$	14,028		$	2,131		$	8		$	—		$	62,629

2018
Balance at beginning of period	$	18,549		$	22,802	$	6,728		$	10,920		$	2,870		$	7		$	648		$	62,524
Provision charged (credited)	(809		)	965		420			1,118			202			1			(397		)	1,500
Recoveries	108			—		—			24			17			—			—			149
Charge-offs	(323		)	—		—			(197		)	(246		)	(1		)	—			(767		)
Balance at end of period	$	17,525		$	23,767	$	7,148		$	11,865		$	2,843		$	7		$	251		$	63,406

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



	For the Nine Months Ended September 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)	1,215			(282		)	541		485			(255		)	1			—		1,705
Recoveries	29			—			2		374			29			—			—		434
Charge-offs	(743		)	—			—		(1,007		)	(101		)	(1		)	—		(1,852		)
Balance at end of period	$	15,733		$	22,969		$	7,760	$	14,028		$	2,131		$	8		$	—	$	62,629

2018
Balance at beginning of period	$	19,991		$	19,933		$	5,217	$	8,275		$	4,577		$	8		$	177	$	58,178
Provision charged (credited)	(2,362		)	3,962			1,928		3,902			(1,607		)	3			74		5,900
Recoveries	280			—			3		111			119			5			—		518
Charge-offs	(384		)	(128		)	—		(423		)	(246		)	(9		)	—		(1,190		)
Balance at end of period	$	17,525		$	23,767		$	7,148	$	11,865		$	2,843		$	7		$	251	$	63,406

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

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



	At September 30, 2019
	Recorded Investment		Unpaid Principal Balance		Specific Allowance
	(In thousands)
With no allowance recorded:
Real estate loans:
One-to-four family	$	4,420	$	5,565	$	—
Multifamily and commercial	1,511		2,212		—
Commercial business loans	2,223		2,411		—
Consumer loans:
Home equity loans and advances	1,632		1,769		—
	9,786		11,957		—
With a specific allowance recorded:
Real estate loans:
One-to-four family	4,711		4,761		507
Multifamily and commercial	1,113		1,113		2
Commercial business loans	4,876		4,876		607
Consumer loans:
Home equity loans and advances	1,074		1,074		14
	11,774		11,824		1,130
Total:
Real estate loans:
One-to-four family	9,131		10,326		507
Multifamily and commercial	2,624		3,325		2
Commercial business loans	7,099		7,287		607
Consumer loans:
Home equity loans and advances	2,706		2,843		14
Total loans	$	21,560	$	23,781	$	1,130

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 $1.1 million and $915,000 at September 30, 2019 and December 31, 2018, respectively. At September 30, 2019 and December 31, 2018, impaired loans for which there was no related allowance for loan losses totaled $9.8 million and $11.6 million, respectively.

The recorded investment in TDRs totaled $18.7 million at September 30, 2019, of which there were no loans which had a payment default within the twelve month period ending September 30, 2019. The recorded investment in TDRs totaled $16.0 million at December 31, 2018, of which there no loans which had a payment default within the twelve month period ending 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 nine months ended September 30, 2019 and 2018:



	For the Three Months Ended September 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Real estate loans:
One-to-four family	$	8,773	$	101	$	10,606	$	107
Multifamily and commercial	2,637		37		2,717		30
Construction	850		—		—		—
Commercial business loans	7,461		88		3,098		24
Consumer loans:
Home equity loans and advances	2,629		35		3,447		39
Total loans	$	22,350	$	261	$	19,868	$	200



	For the Nine Months Ended September 30,
	2019				2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In thousands)
Real estate loans:
One-to-four family	$	9,144	$	340	$	10,873	$	105
Multifamily and commercial	2,667		111		2,961		29
Construction	850		—		—		—
Commercial business loans	5,848		268		3,390		25
Consumer loans:
Home equity loans and advances	2,866		122		3,233		39
Total loans	$	21,375	$	841	$	20,457	$	198

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

Pass	$	1,841,273	$	2,303,084	$	268,522	$	351,083	$	361,384	$	1,681	$	5,127,027
Special mention	—		140		—		14,086		—		—		14,226
Substandard	3,234		13,698		—		10,243		1,048		—		28,223
Doubtful	—		—		—		—		—		—		—
Total	$	1,844,507	$	2,316,922	$	268,522	$	375,412	$	362,432	$	1,681	$	5,169,476



	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