Loans are reported at their outstanding principal balance net of any unearned income, charge-offs, deferred loan fees and costs on originated loans and unamortized premiums or discounts on purchased loans. Loan fees and certain loan origination costs are deferred. Net loan origination costs and premiums or discounts on loans purchased are amortized into interest income over the contractual life of the loans using the level-yield method. Accrued interest receivable totaled $23.0 million at March 31, 2020 and was reported in “Interest and dividends receivable” on the Consolidated Statements of Financial Condition. Prepayment penalties received on loans which pay in full prior to their scheduled maturity are included in interest income in the period they are collected.

Interest on loans is recognized on the accrual basis. The accrual of income on loans is generally discontinued when certain factors, such as contractual delinquency of 90 days or more, indicate reasonable doubt as to the timely collectability of such income. Uncollected interest previously recognized on non-accrual loans is reversed from interest income at the time the loan is placed on non-accrual status. A non-accrual loan can be returned to accrual status when contractual delinquency returns to less than 90 days delinquent. Payments received on non-accrual loans that do not bring the loan to less than 90 days delinquent are recorded on a cash basis. Payments can also be applied first as a reduction of principal until all principal is recovered and then subsequently to interest, if in management’s opinion, it is evident that recovery of all principal due is likely to occur.

The Company recognizes a loan as non-performing when the borrower has demonstrated the inability to bring the loan current, or due to other circumstances which, in management’s opinion, indicate the borrower will be unable to bring the loan current within a reasonable time. All loans classified as non-performing, which includes all loans past due 90 days or

more, are classified as non-accrual unless the loan is well secured and there is, in our opinion, compelling evidence the borrower will bring the loan current in the immediate future. Prior to a real estate secured loan becoming 90 days delinquent, an updated appraisal is ordered and/or an internal evaluation is prepared.

The Allowance for credit losses (“ACL”) is an estimate that is deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial assets. Loans are charged off against that allowance when management believes that a loan balance is uncollectable based on quarterly analysis of credit risk.

As of January 1, 2020, the Company adopted Topic 326, see Note 16 related to the adoption of Topic 326.

The amount of the ACL is based upon a loss rate model that considers multiple factors which reflects management’s assessment of the credit quality of the loan portfolio. Management estimates the allowance balance using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The factors are both quantitative and qualitative in nature including, but not limited to, historical losses, economic conditions, trends in delinquencies, value and adequacy of underlying collateral, volume and portfolio mix, and internal loan processes.

The quantitative allowance is calculated using a number of input and assumptions. The process and guidelines were developed using, among other factors, the guidance from federal banking regulatory agencies and GAAP. The results of this process, support management’s assessment as to the adequacy of the ACL at each balance sheet date.

The process for calculating the allowance for credit losses begins with our historical losses by portfolio segment. The losses are then incorporated into reasonable and supportable forecast to develop the quantitative component of the allowance for credit losses.

The Company specifies both the reasonable and supportable forecast and reversion periods in three economic conditions (expansion, transition, contraction) which could range from 6 months to 24 months. When calculating the ACL estimate for March 31, 2020, Management acknowledged the deteriorating economic conditions as a result of the COVID-19 pandemic were not fully captured in the forecast within the model platform. As such, when determining the reasonable and supportable forecast, Management adjusted the period to reflect a supportable forecast of six months, to align with a previously established framework for contraction periods. Similarly, a reversion period of six quarters was adjusted to reflect the shorter end of a contraction period.

The Bank has established an Asset Classification Committee which carefully evaluates loans which are past due 90 days and/or are classified. The Asset Classification Committee thoroughly assesses the condition and circumstances surrounding each loan meeting the criteria. The Bank also has a Delinquency Committee that evaluates loans meeting specific criteria. The Bank’s loan policy requires loans to be placed into non-accrual status once the loan becomes 90 days delinquent unless there is, compelling evidence the borrower will bring the loan current in the immediate future.

For the quantitative measurement, the Company’s portfolio consists of mortgage loans secured by real estate (both commercial and retail) and non-mortgage loans, which are primarily commercial business term loans and line of credit. Based on the Company’s evaluation of the loan portfolio, below are the pools that were established as a baseline level of segmentation with their primary risk factor. The Company confirms this data remains relevant in absence of changes to the composition of the portfolio.

The mortgage portfolio is a substantial component of Company’s portfolio and it is a focus of the Company’s lending strategy, primarily focusing on multi-family and commercial real estate. While the mortgage portfolio consists of real-estate secured loans, the source of repayment and types of properties securing these loans varies and thus the Company first considered these differences as follows:

Relative to the non-mortgage portfolio, the Company considered the following categories as a baseline for evaluation:

Commercial Business – These loans are not typically secured by real estate. The primary source of repayment is cash flows from operations of the borrower’s business. Within this category are Small Business Administration (“SBA”) credits and Equipment Finance credits. Delinquency status, risk rating and industry are considered a risk factors in this pool.

Commercial Business secured by real estate – While these loans are secured by properties used by the borrower for commercial use, the primary source of repayment is the income generated by the borrower’s business use of the property and thus these are considered Commercial Business loans. Delinquency status, risk rating and industry are considered risk factors in this pool.

Taxi Medallions These loans consist primarily of loans made to New York taxi medallion owners and are secured by liens on the taxi medallions. No new taxi medallions have been originated since 2014, the remaining portfolio is running off and all credits are individually evaluated for expected credit losses. As a result, a segmentation analysis is not relevant for this portfolio.

Lastly, the Company identified that the remainder of the portfolio includes Overdraft lines of credit.

Overdrafts – These are unsecured consumer lines of credits and are an immaterial component of the Company’s portfolio.

For the qualitative measurement, the Company aggregated the portfolio segments according to three business units: Business Banking, Residential and Real Estate. In accordance with the interagency statement and SEC guidance, Management evaluates nine qualitative risk factors to determine if the risk is captured elsewhere in the ACL process. If not captured elsewhere, the Company has identified specific risk factors to evaluate and incorporate into its Qualitative Framework. Some risk factors include time to maturity, origination loan-to-value, loan type composition, the value of underlying collateral, changes in policies and procedures for lending strategies and underwriting standards, collection and recovery practices, internal credit review, changes in personnel, divergence between the levels of NYC and national unemployment, divergence between the NYC GDP and national GDP, industry concentrations and riskiness and large borrower concentrations.

The Company recorded an ACL for loans in the amount of $7.1 million for the quarter ending March 31, 2020, primarily due to the deteriorating economic conditions from COVID-19 and growth in the loan portfolio. This will result in the ACL for loans totaling $28.1 million at March 31, 2020, representing 0.47% of gross loans and 167.73% of non-performing loans.

In response to COVID-19, the Company is actively assisting customers by providing short-term modifications in the form of deferrals of interest, principal and/or escrow for terms ranging from one to six months. Through April 17th, modifications for loans with an aggregate outstanding loan balance of approximately $839 million of which $673 million is in our real estate portfolio and $166 million is in our business banking portfolio have been approved. Given the COVID-19 pandemic and current economic environment, we continue to see interest from our customers to modify their loans. The Company actively participated in the SBA Paycheck Protection Program, gaining approval to fund up to $64 million of these loans and expects to participate in the Main Street Lending Program in order to assist customers. Pursuant to the CARES Act, loan modifications made between March 1, 2020 and the earlier of i) December 30, 2020 or ii) 60 days after the President declares a termination of the COVID-19 national emergency are not classified as TDRs if the related loans were not more than 30 days past due as of December 31, 2019. The Company has elected that loans temporarily modified for borrowers directly impacted by COVID-19 are not considered TDR, assuming the above criteria is met.

The Company may restructure loans that are not directly impacted by COVID-19 to enable a borrower experiencing financial difficulties to continue making payments when it is deemed to be in the Company’s best long-term interest. This restructure may include reducing the interest rate or amount of the monthly payment for a specified period of time, after which the interest rate and repayment terms revert to the original terms of the loan. We classify these loans as TDR.

The Company believes that restructuring these loans in this manner will allow certain borrowers to become and remain current on their loans. All loans classified as TDR are individually evaluated, however TDR loans which have been current for six consecutive months at the time they are restructured as TDR remain on accrual status and are not included as part of non-performing loans. Loans which were delinquent at the time they are restructured as a TDR are placed on non-accrual status and reported as non-accrual performing TDR loans until they have made timely payments for six consecutive months. These restructurings have not included a reduction of principal balance.

The allocation of a portion of the allowance for loan losses for a performing TDR loan is based upon the present value of the future expected cash flows discounted at the loan’s original effective rate, or for a non-performing TDR loan which is collateral dependent, the fair value of the collateral. At March 31, 2020, there were no commitments to lend additional funds to borrowers whose loans were modified to a TDR. The modification of loans to a TDR did not have a significant effect on our operating results, nor did it require a significant allocation of the allowance for loan losses.

There were no TDR loan modifications during the three months ended March 31, 2020 and 2019.

The following table shows our recorded investment for loans classified as TDR that are performing according to their restructured terms at the periods indicated:


	March 31, 2020			December 31, 2019
	Number	Recorded		Number	Recorded
(Dollars in thousands)	of contracts	investment		of contracts	investment
Multi-family residential	7	$	1,868	7	$	1,873
One-to-four family - mixed-use property	4		1,483	4		1,481
One-to-four family - residential	3		525	3		531
Taxi medallion ⁽¹⁾	6		1,520	7		1,668
Commercial business and other	3		950	3		941
Total performing troubled debt restructured	23	$	6,346	24	$	6,494

(1)

Taxi medallion loans in the table above continue to pay as agreed, however the company records interest received on a cash basis.

During the three months ended March 31, 2020 and 2019, there were no defaults of TDR loans within 12 months of their modification date. One loan was transferred to non-performing status during the three months ended March 31, 2020. The following table shows our recorded investment for loans classified as TDR that are not performing according to their restructured terms at the periods indicated:


	March 31, 2020			December 31, 2019
	Number	Recorded		Number	Recorded
(Dollars in thousands)	of contracts	investment		of contracts	investment
Taxi medallion	5	$	1,195	4	$	1,065
Commercial business and other	1		279	1		279
Total troubled debt restructurings that subsequently defaulted	6	$	1,474	5	$	1,344

The following table shows our non-accrual loans at amortized cost with no related allowance and interest income recognized for loans ninety days or more past due and still accruing for period shown below:


	At or three months ended March 31, 2020
				Non-Accrual				Loans ninety days
		Total Non-Accrual		with no related		Interest Income		or more past due
(In thousands)		Amortized Cost		Allowance		Recognized		and still accruing:
Multi-family residential	$	2,763	$	2,763	$	—	$	—
Commercial real estate		8		8		—		—
One-to-four family - mixed-use property		627		346		—		—
One-to-four family - residential		4,588		4,588		—		—
Construction loans		—		—		—		—
Small Business Administration		1,544		1,544		—		—
Taxi Medallion ⁽¹⁾		1,763		1,763		9		—
Commercial business and other ⁽¹⁾		5,006		5,001		—		—
Total	$	16,299	$	16,013	$	9	$	—

(1)

Not included in the above analysis are non-accrual performing TDR taxi medallion loans totaling $1.5 million at March 31, 2020 and non-accrual performing TDR commercial business loans totaling $1.0 million at March 31, 2020.

The following table shows our non-performing loans at the period indicated:


	December 31,
(In thousands)	2019
Loans ninety days or more past due and still accruing:
Multi-family residential	$	445
Total		445
Non-accrual mortgage loans:
Multi-family residential		2,296
Commercial real estate		367
One-to-four family - mixed-use property		274
One-to-four family - residential		5,139
Total		8,076
Non-accrual non-mortgage loans:
Small Business Administration		1,151
Taxi medallion⁽¹⁾		1,641
Commercial business and other ⁽¹⁾		1,945
Total		4,737
Total non-accrual loans		12,813
Total non-performing loans	$	13,258

(1)	Not included in the above analysis are non-accrual performing TDR taxi medallion loans totaling $1.7 million at December 31, 2019, respectively and non-accrual performing TDR commercial business loans totaling $0.9 million at December 31, 2019.

The following is a summary of interest foregone on non-accrual loans and loans classified as TDR for the periods indicated:


	For the three months ended
	March 31,
	2020		2019

Interest income that would have been recognized had the loans performed in accordance with their original terms	$	375	$	394
Less: Interest income included in the results of operations		89		118
Total foregone interest	$	286	$	276

The following tables shows the aging of the amortized cost basis in past-due loans at the period indicated by class of loans:


	March 31, 2020
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	1,919	$	—	$	2,763	$	4,682	$	2,274,090	$	2,278,772
Commercial real estate		5,206		—		8		5,214		1,661,599		1,666,813
One-to-four family - mixed-use property		3,283		—		627		3,910		592,435		596,345
One-to-four family - residential		1,322		381		4,588		6,291		193,593		199,884
Construction loans		—		—		—		—		66,524		66,524
Small Business Administration		—		—		1,544		1,544		12,961		14,505
Taxi medallion		—		—		1,195		1,195		2,087		3,282
Commercial business and other		645		153		4,968		5,766		1,100,197		1,105,963
Total	$	12,375	$	534	$	15,693	$	28,602	$	5,903,486	$	5,932,088

The following tables show by delinquency an analysis of our recorded investment in loans at the periods indicated by class of loans:


	December 31, 2019
					Greater
	30 - 59 Days		60 - 89 Days		than		Total Past
(In thousands)	Past Due		Past Due		90 Days		Due		Current		Total Loans
Multi-family residential	$	4,042	$	1,563	$	2,741	$	8,346	$	2,230,245	$	2,238,591
Commercial real estate		—		4,941		367		5,308		1,576,700		1,582,008
One-to-four family - mixed-use property		1,117		496		274		1,887		590,584		592,471
One-to-four family - residential		720		1,022		5,139		6,881		181,335		188,216
Co-operative apartments		—		—		—		—		8,663		8,663
Construction loans		—		—		—		—		67,754		67,754
Small Business Administration		—		—		1,151		1,151		13,294		14,445
Taxi medallion		—		—		1,065		1,065		2,244		3,309
Commercial business and other		2,340		5		1,945		4,290		1,057,188		1,061,478
Total	$	8,219	$	8,027	$	12,682	$	28,928	$	5,728,007	$	5,756,935

The following tables show the activity in the allowance for loan losses for the three month periods indicated:


	March 31, 2020
					One-to-four
					family -		One-to-four								Commercial
	Multi-family		Commercial		mixed-use		family -		Construction		Small Business		Taxi		business and
(In thousands)	residential		real estate		property		residential		loans		Administration		medallion		other		Total
Allowance for credit losses:
Beginning balance	$	5,391	$	4,429	$	1,817	$	756	$	441	$	363	$	—	$	8,554	$	21,751
Impact of CECL Adoption		(651)		1,170		(55)		(159)		(279)		1,180		—		(827)		379
Charge-offs		—		—		—		—		—		—		—		(1,259)		(1,259)
Recoveries		7		—		78		4		—		7		—		14		110
Provision (benefit)		1,148		1,192		330		291		23		(22)		—		4,155		7,117
Ending balance	$	5,895	$	6,791	$	2,170	$	892	$	185	$	1,528	$	—	$	10,637	$	28,098


	March 31, 2019
					One-to-four
					family -		One-to-four								Commercial
	Multi-family		Commercial		mixed-use		family -		Construction		Small Business		Taxi		business and
(In thousands)	residential		real estate		property		residential		loans		Administration		medallion		other		Total
Allowance for credit losses:
Beginning balance	$	5,676	$	4,315	$	1,867	$	749	$	329	$	418	$	—	$	7,591	$	20,945
Charge-offs		—		—		(1)		—		—		—		—		(1,137)		(1,138)
Recoveries		13		—		86		4		—		4		84		45		236
Provision (benefit)		(196)		(37)		(161)		(22)		22		(13)		(84)		1,463		972
Ending balance	$	5,493	$	4,278	$	1,791	$	731	$	351	$	409	$	—	$	7,962	$	21,015

In accordance with our policy and the current regulatory guidelines, we designate loans as “Special Mention,” which are considered “Criticized Loans,” and “Substandard,” “Doubtful,” or “Loss,” which are considered “Classified Loans”. If a loan does not fall within one of the previous mentioned categories then the loan would be considered “Pass.” Loans that are non-accrual are designated as Substandard, Doubtful or Loss. These loan designations are updated quarterly. We designate a loan as Substandard when a well-defined weakness is identified that may jeopardize the orderly liquidation of the debt. We designate a loan Doubtful when it displays the inherent weakness of a Substandard loan with the added provision that collection of the debt in full, on the basis of existing facts, is highly improbable. We designate a loan as Loss if it is deemed the debtor is incapable of repayment. The Company does not hold any loans designated as Loss, as loans that are designated as Loss are charged to the Allowance for Credit Losses. We designate a loan as Special Mention if the asset does not warrant classification within one of the other classifications, but does contain a potential weakness that deserves closer attention.

The following table summarizes the risk category of mortgage and non-mortgage loans by loan portfolio segments and class of loans by year of origination :


	For the year ended
														Revolving Loans,		Lines of Credit
														Amortized Cost		converted to
(In thousands)		2020		2019		2018		2017		2016		Prior		Basis		term loans
1-4 Family Residential
Pass	$	8,526	$	26,292	$	29,807	$	16,352	$	11,399	$	65,998	$	9,361	$	22,132
Watch		—		—		—		—		—		2,759		—		1,809
Special Mention		—		—		—		—		—		444		146		147
Substandard		—		—		—		—		950		2,906		—		856
Total 1-4 Family Residential	$	8,526	$	26,292	$	29,807	$	16,352	$	12,349	$	72,107	$	9,507	$	24,944
1-4 Family Mixed-Use
Pass	$	15,189	$	70,064	$	78,136	$	63,655	$	54,009	$	304,415	$	—	$	—
Watch		—		—		793		—		1,325		7,148		—		—
Special Mention		—		—		—		—		—		984		—		—
Substandard		—		—		—		—		—		627		—		—
Total 1-4 Family Mixed Use	$	15,189	$	70,064	$	78,929	$	63,655	$	55,334	$	313,174	$	—	$	—
Commercial Real Estate
Pass	$	75,893	$	254,086	$	283,515	$	194,618	$	239,116	$	511,871	$	—	$	—
Watch		4,979		9,762		—		4,963		20,748		66,711		—		—
Special Mention		—		—		—		—		—		543		—		—
Substandard		—		—		—		—		—		8		—		—
Total Commercial Real Estate	$	80,872	$	263,848	$	283,515	$	199,581	$	259,864	$	579,133	$	—	$	—
Construction
Pass	$	4,885	$	15,633	$	35,934	$	—	$	9,394	$	—	$	—	$	—
Special Mention		—		—		678		—		—		—		—		—
Total Construction	$	4,885	$	15,633	$	36,612	$	—	$	9,394	$	—	$	—	$	—
Multifamily
Pass	$	68,498	$	313,608	$	369,264	$	376,202	$	283,128	$	846,228	$	4,460	$	—
Watch		—		—		—		2,158		2,843		9,620		—		—
Substandard		—		—		1,974		—		—		789		—		—
Total Multifamily	$	68,498	$	313,608	$	371,238	$	378,360	$	285,971	$	856,637	$	4,460	$	—
Commercial Business - Secured by RE
Pass	$	27,601	$	117,070	$	59,408	$	22,399	$	44,964	$	85,736	$	—	$	—
Watch		—		—		6,647		1,320		2,701		3,276		—		—
Special Mention		—		—		—		—		—		423		—		—
Substandard		—		—		—		—		—		2,330		—		—
Total Commercial Business - Secured by RE	$	27,601	$	117,070	$	66,055	$	23,719	$	47,665	$	91,765	$	—	$	—
Commercial Business
Pass	$	39,770	$	151,169	$	117,548	$	73,802	$	18,931	$	73,775	$	213,463	$	—
Watch		1,221		1,001		2,372		3,114		445		587		19,162		—
Special Mention		—		—		15				2,683		463		317		—
Substandard		—		577		340		3,386		6,255		1,211		94		—
Doubtful		—		—		—		—		—		108		—		—
Total Commercial Business	$	40,991	$	152,747	$	120,275	$	80,302	$	28,314	$	76,144	$	233,036	$	—
Small Business Administration
Pass	$	—	$	986	$	3,626	$	1,072	$	2,704	$	2,220	$	—	$	—
Watch		—		—		—		2,299		—		—		—		—
Special Mention		—		—		—		—		—		54		—		—
Substandard		—		—		—		1,170		374		—		—		—
Total Small Business Administration	$	—	$	986	$	3,626	$	4,541	$	3,078	$	2,274	$	—	$	—
Taxi Medallions
Substandard		—		—		—		—		—		3,282		—		—
Total Taxi Medallions	$	—	$	—	$	—	$	—	$	—	$	3,282	$	—	$	—
Other
Pass	$	—	$	—	$	—	$	—	$	—	$	105	$	171	$	—
Watch		—		—		—		—		—		—		3		—
Total Other	$	—	$	—	$	—	$	—	$	—	$	105	$	174	$	—

Total Loans	$	246,562	$	960,248	$	990,057	$	766,510	$	701,969	$	1,994,621	$	247,177	$	24,944

The following table sets forth the recorded investment in loans designated as Criticized or Classified at the period indicated:


	December 31, 2019
(In thousands)	Special Mention		Substandard		Doubtful		Loss		Total
Multi-family residential	$	1,563	$	2,743	$	—	$	—	$	4,306
Commercial real estate		5,525		367		—		—		5,892
One-to-four family - mixed-use property		1,585		453		—		—		2,038
One-to-four family - residential		1,095		5,787		—		—		6,882
Construction		—		—		—		—		—
Small Business Administration		55		85		—		—		140
Taxi medallion		—		3,309		—		—		3,309
Commercial business and other		3,924		11,289		266		—		15,479
Total loans	$	13,747	$	24,033	$	266	$	—	$	38,046

Commitments to extend credit (principally real estate mortgage loans) and lines of credit (principally home equity lines of credit and business lines of credit) amounted to $51.9 million and $259.9 million, respectively, at March 31, 2020.

The following tables presents types of collateral-dependent loans by class of loans as of March 31, 2020:



	Collateral Type
(In thousands)		Real Estate		Business Assets
Multi-family residential	$	2,763	$	—
Commercial real estate		8		—
One-to-four family - mixed-use property		627		—
One-to-four family - residential		4,588		—
Small Business Administration		—		1,544
Commercial business and other		—		5,000
Taxi Medallion		—		3,282
Total	$	7,986	$	9,826

Off-Balance Sheet Credit Losses

Also included within scope of the CECL standard are off-balance sheet loan commitments, which includes the unfunded portion of committed lines of credit and commitments “in-process”. Commitments “in‐process” reflect loans not in the Company’s books but rather negotiated loan / line of credit terms and rates that the Company has offered to customers and is committed to honoring. In reference to “in‐process” credits, the Company defines an unfunded commitment as a credit that has been offered to and accepted by a borrower, which has not closed and by which the obligation is not unconditionally cancellable.

The Company estimates expected credit losses over the contractual period in which the company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on losses on off-balance sheet exposures is adjusted as a provision for credit loss expense. The Company uses similar assumptions and risk factors that are developed for collectively evaluated financing receivables. This estimates includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments to be funded over its estimated life.

At March 31, 2020, allowance for off-balance-sheet credit losses is $0.8 million, which is included the “Other liabilities” on the Consolidated Statements of Financial Condition. During the first quarter 2020, the Company has $0.2 million in credit loss expense for off-balance-sheet items, which is included in the “Other operating expense” on the Consolidated Statements of Income.