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Loans | 6 Months Ended
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Jun. 30, 2017
Loans | Note 5: Loans The following table sets forth the composition of the loan portfolio at the dates indicated:
|  | June 30, 2017 |  |  | December 31, 2016 |
|  | Amount |  |  | Percent of Non-Covered Loans Held for Investment |  |  | Amount |  |  | Percent of Non-Covered Loans Held for Investment |
(dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Non-Covered Loans Held for Investment: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mortgage Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multi-family |  | $ | 26,859,208 |  |  |  | 72.15 | % |  | $ | 26,945,052 |  |  |  | 72.13 | %
Commercial real estate |  |  | 7,540,633 |  |  |  | 20.26 |  |  |  | 7,724,362 |  |  |  | 20.68 |
One-to-four family |  |  | 412,945 |  |  |  | 1.11 |  |  |  | 381,081 |  |  |  | 1.02 |
Acquisition, development, and construction |  |  | 373,041 |  |  |  | 1.00 |  |  |  | 381,194 |  |  |  | 1.02 |
Total mortgage loans held for investment |  | $ | 35,185,827 |  |  |  | 94.52 |  |  | $ | 35,431,689 |  |  |  | 94.85 |
Other Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 1,485,487 |  |  |  | 3.99 |  |  |  | 1,341,216 |  |  |  | 3.59 |
Lease financing, net of unearned income of $56,205 and $60,278, respectively |  |  | 544,995 |  |  |  | 1.47 |  |  |  | 559,229 |  |  |  | 1.50 |
Total commercial and industrial loans (1) |  |  | 2,030,482 |  |  |  | 5.46 |  |  |  | 1,900,445 |  |  |  | 5.09 |
Purchased credit-impaired loans |  |  | 5,406 |  |  |  | 0.01 |  |  |  | 5,762 |  |  |  | 0.01 |
Other |  |  | 4,129 |  |  |  | 0.01 |  |  |  | 18,305 |  |  |  | 0.05 |
Total other loans held for investment |  |  | 2,040,017 |  |  |  | 5.48 |  |  |  | 1,924,512 |  |  |  | 5.15 |
Total non-covered loans held for investment |  | $ | 37,225,844 |  |  |  | 100.00 | % |  | $ | 37,356,201 |  |  |  | 100.00 | %
Net deferred loan origination costs |  |  | 25,195 |  |  |  |  |  |  |  | 26,521 |  |  |  |  |
Allowance for losses on non-covered loans |  |  | (154,683 | ) |  |  |  |  |  |  | (158,290 | ) |  |  |  |
Non-covered loans held for investment, net |  | $ | 37,096,356 |  |  |  |  |  |  | $ | 37,224,432 |  |  |  |  |
Covered loans |  |  | — |  |  |  |  |  |  |  | 1,698,133 |  |  |  |  |
Allowance for losses on covered loans |  |  | — |  |  |  |  |  |  |  | (23,701 | ) |  |  |  |
Covered loans, net |  | $ | — |  |  |  |  |  |  | $ | 1,674,432 |  |  |  |  |
Loans held for sale |  |  | 1,803,724 |  |  |  |  |  |  |  | 409,152 |  |  |  |  |
Total loans, net |  | $ | 38,900,080 |  |  |  |  |  |  | $ | 39,308,016 |  |  |  |  |
(1) | Includes specialty finance loans of $1.5 billion at June 30, 2017 and $1.3 billion at December 31, 2016, and other commercial and industrial loans of $566.4 million and $632.9 million, respectively, at June 30, 2017 and December 31, 2016.
Non-Covered Loans Non-Covered Loans Held for Investment The majority of the loans the Company originates for investment are multi-family loans, most of which are collateralized by non-luxury apartment buildings in New York City with rent-regulated units and below-market rents. In addition, the Company originates commercial real estate (“CRE”) loans, most of which are collateralized by income-producing properties such as office buildings, retail centers, mixed-use buildings, and multi-tenanted light industrial properties that are located in New York City and on Long Island. To a lesser extent, the Company also originates one-to-four family loans, acquisition, development, and construction (“ADC”) loans, and commercial and industrial (“C&I”) loans, for investment. One-to-four family loans held for investment are originated through the Company’s mortgage banking operation and primarily consist of jumbo prime adjustable rate mortgages made to borrowers with a solid credit history. ADC loans are primarily originated for multi-family and residential tract projects in New York City and on Long Island. C&I loans consist of asset-based loans, equipment loans and leases, and dealer floor-plan loans (together, “specialty finance loans and leases”) that generally are made to large corporate obligors, many of which are publicly traded, carry investment grade or near-investment grade ratings, and participate in stable industries nationwide; and “other” C&I loans that primarily are made to small and mid-size businesses in Metro New York. “Other” C&I loans are typically made for working capital, business expansion, and the purchase of machinery and equipment. The repayment of multi-family and CRE loans generally depends on the income produced by the underlying properties which, in turn, depends on their successful operation and management. To mitigate the potential for credit losses, the Company underwrites its loans in accordance with credit standards it considers to be prudent, looking first at the consistency of the cash flows being produced by the underlying property. In addition, multi-family buildings and CRE properties are inspected as a prerequisite to approval, and independent appraisers, whose appraisals are carefully reviewed by the Company’s in-house appraisers, perform appraisals on the collateral properties. In many cases, a second independent appraisal review is performed. To further manage its credit risk, the Company’s lending policies limit the amount of credit granted to any one borrower and typically require conservative debt service coverage ratios and loan-to-value ratios. Nonetheless, the ability of the Company’s borrowers to repay these loans may be impacted by adverse conditions in the local real estate market and the local economy. Accordingly, there can be no assurance that its underwriting policies will protect the Company from credit-related losses or delinquencies. ADC loans typically involve a higher degree of credit risk than loans secured by improved or owner-occupied real estate. Accordingly, borrowers are required to provide a guarantee of repayment and completion, and loan proceeds are disbursed as construction progresses, as certified by in-house or third-party engineers. The Company seeks to minimize the credit risk on ADC loans by maintaining conservative lending policies and rigorous underwriting standards. However, if the estimate of value proves to be inaccurate, the cost of completion is greater than expected, or the length of time to complete and/or sell or lease the collateral property is greater than anticipated, the property could have a value upon completion that is insufficient to assure full repayment of the loan. This could have a material adverse effect on the quality of the ADC loan portfolio, and could result in losses or delinquencies. In addition, the Company utilizes the same stringent appraisal process for ADC loans as it does for its multi-family and CRE loans. To minimize the risk involved in specialty finance lending and leasing, the Company participates in syndicated loans that are brought to it, and equipment loans and leases that are assigned to it, by a select group of nationally recognized sources who have had long-term relationships with its experienced lending officers. Each of these credits is secured with a perfected first security interest or outright ownership in the underlying collateral, and structured as senior debt or as a non-cancelable lease. To further minimize the risk involved in specialty finance lending and leasing, each transaction is re-underwritten. In addition, outside counsel is retained to conduct a further review of the underlying documentation. To minimize the risks involved in other C&I lending, the Company underwrites such loans on the basis of the cash flows produced by the business; requires that such loans be collateralized by various business assets, including inventory, equipment, and accounts receivable, among others; and typically requires personal guarantees. However, the capacity of a borrower to repay such a C&I loan is substantially dependent on the degree to which the business is successful. In addition, the collateral underlying such loans may depreciate over time, may not be conducive to appraisal, or may fluctuate in value, based upon the results of operations of the business. Included in non-covered loans held for investment at June 30, 2017 and December 31, 2016, respectively, were loans of $58.2 million and $91.8 million to officers, directors, and their related interests and parties. There were no loans to principal shareholders at either of those dates. Non-covered purchased credit-impaired (“PCI”) loans, which had a carrying value of $5.4 million and an unpaid principal balance of $6.2 million at June 30, 2017, are loans that had been covered under an FDIC Loss Share Agreement that expired in March 2015 and that now are included in non-covered loans. Such loans continue to be accounted for under Accounting Standards Codification (“ASC”) 310-30 and were initially measured at fair value, which included estimated future credit losses expected to be incurred over the lives of the loans. Under ASC 310-30, purchasers are permitted to aggregate acquired loans into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Loans Held for Sale The Community Bank’s mortgage banking operation originates, aggregates, sells, and services one-to-four family loans. Community banks, credit unions, mortgage companies, and mortgage brokers use its proprietary web-accessible mortgage banking platform to originate and close one-to-four family loans nationwide. These loans are generally sold to GSEs, servicing retained. To a much lesser extent, the Community Bank uses its mortgage banking platform to originate jumbo loans that are typically sold to other financial institutions. Such loans have not represented, nor are they expected to represent, a material portion of the held-for-sale loans originated by the Community Bank. In addition, the Community Bank currently services mortgage loans for various third parties, primarily including GSEs. On June 27, 2017, the Company entered into an agreement to sell its mortgage banking business, which was acquired as part of its 2009 FDIC-assisted acquisition of AmTrust Bank (“AmTrust”) and is reported under the Company’s Residential Mortgage Banking segment, to Freedom Mortgage Corporation (“Freedom”). Freedom will acquire both the Company’s origination and servicing platforms, as well as our mortgage servicing rights asset of approximately $220.6 million and loans of approximately $266.9 million. Additionally, the Company has received approval from the FDIC to sell the assets covered under our Loss Share Agreements (the “LSA”) and we have entered into an agreement to sell the majority of our one-to-four family residential mortgage-related assets of approximately $1.5 billion, including those covered under the LSA, to an affiliate of Cerberus Capital Management, L.P. (“Cerberus”). The transactions are expected to close during the third quarter of 2017, subject to certain closing conditions. The decision to sell the mortgage banking business and to sell the assets covered under our LSA was the result of an evaluation with the Board of Directors and our outside advisors. Selling to a large, national, full-service mortgage banking company that would keep certain employees and maintain operations in the region were important considerations during the evaluation process. These actions are consistent with the Company’s strategic objectives. Such sales allow the Company to focus on its core business model, including growth through acquisitions, generate liquidity which will be redeployed into higher-earning assets, enhance returns through improved efficiencies, and reposition our balance sheet. Asset Quality The following table presents information regarding the quality of the Company’s non-covered loans held for investment (excluding non-covered PCI loans) at June 30, 2017:
(in thousands) |  | Loans 30-89 Days Past Due(1) |  |  | Non-Accrual Loans(1) |  |  | Loans 90 Days or More Delinquent and Still Accruing Interest |  |  | Total Past Due Loans |  |  | Current Loans |  |  | Total Loans Receivable |
Multi-family |  | $ | 4,201 |  |  | $ | 9,820 |  |  | $ | — |  |  | $ | 14,021 |  |  | $ | 26,845,187 |  |  | $ | 26,859,208 |
Commercial real estate |  |  | 1,586 |  |  |  | 4,497 |  |  |  | — |  |  |  | 6,083 |  |  |  | 7,534,550 |  |  |  | 7,540,633 |
One-to-four family |  |  | 297 |  |  |  | 10,724 |  |  |  | — |  |  |  | 11,021 |  |  |  | 401,924 |  |  |  | 412,945 |
Acquisition, development, and construction |  |  | — |  |  |  | 6,200 |  |  |  | — |  |  |  | 6,200 |  |  |  | 366,841 |  |  |  | 373,041 |
Commercial and industrial (2) (3) |  |  | 6,036 |  |  |  | 49,484 |  |  |  | — |  |  |  | 55,520 |  |  |  | 1,974,962 |  |  |  | 2,030,482 |
Other |  |  | 15 |  |  |  | 1,263 |  |  |  | — |  |  |  | 1,278 |  |  |  | 2,851 |  |  |  | 4,129 |
Total |  | $ | 12,135 |  |  | $ | 81,988 |  |  | $ | — |  |  | $ | 94,123 |  |  | $ | 37,126,315 |  |  | $ | 37,220,438 |
(1) | Excludes $595 thousand of non-covered PCI loans that were 90 days or more past due.
(2) | Includes lease financing receivables, all of which were current.
(3) | Includes $6.0 million and $34.3 million of taxi medallion loans or taxi medallion-related loans that were 30 to 89 days past due and 90 days or more past due, respectively.
The following table presents information regarding the quality of the Company’s non-covered loans held for investment (excluding non-covered PCI loans) at December 31, 2016:
(in thousands) |  | Loans 30-89 Days Past Due(1) |  |  | Non-Accrual Loans(1) |  |  | Loans 90 Days or More Delinquent and Still Accruing Interest |  |  | Total Past Due Loans |  |  | Current Loans |  |  | Total Loans Receivable |
Multi-family |  | $ | 28 |  |  | $ | 13,558 |  |  | $ | — |  |  | $ | 13,586 |  |  | $ | 26,931,466 |  |  | $ | 26,945,052 |
Commercial real estate |  |  | — |  |  |  | 9,297 |  |  |  | — |  |  |  | 9,297 |  |  |  | 7,715,065 |  |  |  | 7,724,362 |
One-to-four family |  |  | 2,844 |  |  |  | 9,679 |  |  |  | — |  |  |  | 12,523 |  |  |  | 368,558 |  |  |  | 381,081 |
Acquisition, development, and construction |  |  | — |  |  |  | 6,200 |  |  |  | — |  |  |  | 6,200 |  |  |  | 374,994 |  |  |  | 381,194 |
Commercial and industrial (2) (3) |  |  | 7,263 |  |  |  | 16,422 |  |  |  | — |  |  |  | 23,685 |  |  |  | 1,876,760 |  |  |  | 1,900,445 |
Other |  |  | 248 |  |  |  | 1,313 |  |  |  | — |  |  |  | 1,561 |  |  |  | 16,744 |  |  |  | 18,305 |
Total |  | $ | 10,383 |  |  | $ | 56,469 |  |  | $ | — |  |  | $ | 66,852 |  |  | $ | 37,283,587 |  |  | $ | 37,350,439 |
(1) | Excludes $6 thousand and $869 thousand of non-covered PCI loans that were 30 to 89 days past due and 90 days or more past due, respectively.
(2) | Includes lease financing receivables, all of which were current.
(3) | Includes $6.8 million and $15.2 million of taxi medallion loans that were 30 to 89 days past due and 90 days or more past due, respectively.
The following table summarizes the Company’s portfolio of non-covered loans held for investment (excluding non-covered PCI loans) by credit quality indicator at June 30, 2017:
|  | Mortgage Loans |  |  | Other Loans |
(in thousands) |  | Multi-Family |  |  | Commercial Real Estate |  |  | One-to-Four Family |  |  | Acquisition, Development, and Construction |  |  | Total Mortgage Loans |  |  | Commercial and Industrial(1) |  |  | Other |  |  | Total Other Loans |
Credit Quality Indicator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 26,664,141 |  |  | $ | 7,525,701 |  |  | $ | 410,772 |  |  | $ | 324,789 |  |  | $ | 34,925,403 |  |  | $ | 1,910,975 |  |  | $ | 4,121 |  |  | $ | 1,915,096 |
Special mention |  |  | 100,089 |  |  |  | 8,515 |  |  |  | — |  |  |  | 42,052 |  |  |  | 150,656 |  |  |  | 38,503 |  |  |  | — |  |  |  | 38,503 |
Substandard |  |  | 94,978 |  |  |  | 6,417 |  |  |  | 2,173 |  |  |  | 6,200 |  |  |  | 109,768 |  |  |  | 81,004 |  |  |  | 8 |  |  |  | 81,012 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 26,859,208 |  |  | $ | 7,540,633 |  |  | $ | 412,945 |  |  | $ | 373,041 |  |  | $ | 35,185,827 |  |  | $ | 2,030,482 |  |  | $ | 4,129 |  |  | $ | 2,034,611 |
(1) | Includes lease financing receivables, all of which were classified as “pass.”
The following table summarizes the Company’s portfolio of non-covered loans held for investment (excluding non-covered PCI loans) by credit quality indicator at December 31, 2016:
|  | Mortgage Loans |  |  | Other Loans |
(in thousands) |  | Multi-Family |  |  | Commercial Real Estate |  |  | One-to-Four Family |  |  | Acquisition, Development, and Construction |  |  | Total Mortgage Loans |  |  | Commercial and Industrial(1) |  |  | Other |  |  | Total Other Loans |
Credit Quality Indicator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 26,754,622 |  |  | $ | 7,701,773 |  |  | $ | 371,179 |  |  | $ | 341,784 |  |  | $ | 35,169,358 |  |  | $ | 1,771,975 |  |  | $ | 16,992 |  |  | $ | 1,788,967 |
Special mention |  |  | 164,325 |  |  |  | 12,604 |  |  |  | — |  |  |  | 33,210 |  |  |  | 210,139 |  |  |  | 54,979 |  |  |  | — |  |  |  | 54,979 |
Substandard |  |  | 26,105 |  |  |  | 9,985 |  |  |  | 9,902 |  |  |  | 6,200 |  |  |  | 52,192 |  |  |  | 73,491 |  |  |  | 1,313 |  |  |  | 74,804 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 26,945,052 |  |  | $ | 7,724,362 |  |  | $ | 381,081 |  |  | $ | 381,194 |  |  | $ | 35,431,689 |  |  | $ | 1,900,445 |  |  | $ | 18,305 |  |  | $ | 1,918,750 |
(1) | Includes lease financing receivables, all of which were classified as “pass.”
The preceding classifications are the most current ones available and generally have been updated within the last twelve months. In addition, they follow regulatory guidelines and can generally be described as follows: pass loans are of satisfactory quality; special mention loans have potential weaknesses that deserve management’s close attention; substandard loans are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged (these loans have a well-defined weakness and there is a possibility that the Company will sustain some loss); and doubtful loans, based on existing circumstances, have weaknesses that make collection or liquidation in full highly questionable and improbable. In addition, one-to-four family loans are classified based on the duration of the delinquency. Troubled Debt Restructurings The Company is required to account for certain held-for-investment loan modifications and restructurings as troubled debt restructurings (“TDRs”). In general, a modification or restructuring of a loan constitutes a TDR if the Company grants a concession to a borrower experiencing financial difficulty. A loan modified as a TDR generally is placed on non-accrual status until the Company determines that future collection of principal and interest is reasonably assured, which requires, among other things, that the borrower demonstrate performance according to the restructured terms for a period of at least six consecutive months. In an effort to proactively manage delinquent loans, the Company has selectively extended to certain borrowers concessions such as rate reductions, extension of maturity dates, and forbearance agreements. As of June 30, 2017, loans on which concessions were made with respect to rate reductions and/or extension of maturity dates amounted to $37.4 million; loans on which forbearance agreements were reached amounted to $2.6 million. The following table presents information regarding the Company’s TDRs as of the dates indicated:
|  | June 30, 2017 |  |  | December 31, 2016 |
(in thousands) |  | Accruing |  |  | Non-Accrual |  |  | Total |  |  | Accruing |  |  | Non-Accrual |  |  | Total |
Loan Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multi-family |  | $ | 1,962 |  |  | $ | 8,061 |  |  | $ | 10,023 |  |  | $ | 1,981 |  |  | $ | 8,755 |  |  | $ | 10,736 |
Commercial real estate |  |  | — |  |  |  | 891 |  |  |  | 891 |  |  |  | — |  |  |  | 1,861 |  |  |  | 1,861 |
One-to-four family |  |  | 219 |  |  |  | 3,021 |  |  |  | 3,240 |  |  |  | 222 |  |  |  | 1,749 |  |  |  | 1,971 |
Commercial and industrial |  |  | 177 |  |  |  | 25,512 |  |  |  | 25,689 |  |  |  | 1,263 |  |  |  | 3,887 |  |  |  | 5,150 |
Other |  |  | — |  |  |  | 201 |  |  |  | 201 |  |  |  | — |  |  |  | 202 |  |  |  | 202 |
Total |  | $ | 2,358 |  |  | $ | 37,686 |  |  | $ | 40,044 |  |  | $ | 3,466 |  |  | $ | 16,454 |  |  | $ | 19,920 |
The eligibility of a borrower for work-out concessions of any nature depends upon the facts and circumstances of each loan, which may change from period to period, and involves judgment by Company personnel regarding the likelihood that the concession will result in the maximum recovery for the Company. The financial effects of the Company’s TDRs for the three months ended June 30, 2017 and 2016 are summarized as follows:
|  | For the Three Months Ended June 30, 2017 |
|  |  |  |  |  |  |  |  |  |  | Weighted Average Interest Rate |  |  |  |  |  |  |
(dollars in thousands) |  | Number of Loans |  |  | Pre-Modification Recorded Investment |  |  | Post-Modification Recorded Investment |  |  | Pre-Modification |  |  | Post- Modification |  |  | Charge-off Amount |  |  | Capitalized Interest |
Loan Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One-to-four family |  |  | 3 |  |  | $ | 544 |  |  | $ | 657 |  |  |  | 5.90 | % |  |  | 2.00 | % |  | $ | — |  |  | $ | 7 |
Commercial and industrial |  |  | 13 |  |  |  | 22,752 |  |  |  | 18,722 |  |  |  | 3.49 |  |  |  | 3.45 |  |  |  | 825 |  |  |  | — |
Total |  |  | 16 |  |  | $ | 23,296 |  |  | $ | 19,379 |  |  |  |  |  |  |  |  |  |  | $ | 825 |  |  | $ | 7 |
|  | For the Three Months Ended June 30, 2016 |
|  |  |  |  |  |  |  |  |  |  | Weighted Average Interest Rate |  |  |  |  |  |  |
(dollars in thousands) |  | Number of Loans |  |  | Pre-Modification Recorded Investment |  |  | Post-Modification Recorded Investment |  |  | Pre-Modification |  |  | Post- Modification |  |  | Charge-off Amount |  |  | Capitalized Interest |
Loan Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One-to-four family |  |  | 1 |  |  | $ | 1 |  |  | $ | 108 |  |  |  | 4.13 | % |  |  | 2.00 | % |  | $ | — |  |  | $ | 2 |
Commercial and industrial |  |  | 1 |  |  |  | 651 |  |  |  | 650 |  |  |  | 3.30 |  |  |  | 3.30 |  |  |  | — |  |  |  | — |
Total |  |  | 2 |  |  | $ | 652 |  |  | $ | 758 |  |  |  |  |  |  |  |  |  |  | $ | — |  |  | $ | 2 |
The financial effects of the Company’s TDRs for the six months ended June 30, 2017 and 2016 are summarized as follows:
|  | For the Six Months Ended June 30, 2017 |
|  |  |  |  |  |  |  |  |  |  | Weighted Average Interest Rate |  |  |  |  |  |  |
(dollars in thousands) |  | Number of Loans |  |  | Pre-Modification Recorded Investment |  |  | Post-Modification Recorded Investment |  |  | Pre-Modification |  |  | Post- Modification |  |  | Charge-off Amount |  |  | Capitalized Interest |
Loan Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
One-to-four family |  |  | 4 |  |  | $ | 809 |  |  | $ | 994 |  |  |  | 5.93 | % |  |  | 2.21 | % |  | $ | — |  |  | $ | 12 |
Commercial and industrial |  |  | 30 |  |  |  | 30,714 |  |  |  | 23,151 |  |  |  | 3.45 |  |  |  | 3.45 |  |  |  | 4,104 |  |  |  | — |
Total |  |  | 34 |  |  | $ | 31,523 |  |  | $ | 24,145 |  |  |  |  |  |  |  |  |  |  | $ | 4,104 |  |  | $ | 12 |
|  | For the Six Months Ended June 30, 2016 |
|  |  |  |  |  |  |  |  |  |  | Weighted Average Interest Rate |  |  |  |  |  |  |
(dollars in thousands) |  | Number of Loans |  |  | Pre-Modification Recorded Investment |  |  | Post-Modification Recorded Investment |  |  | Pre-Modification |  |  | Post- Modification |  |  | Charge-off Amount |  |  | Capitalized Interest |
Loan Category: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multi-family |  |  | 1 |  |  | $ | 9,340 |  |  | $ | 8,503 |  |  |  | 4.63 | % |  |  | 4.00 | % |  | $ | — |  |  | $ | — |
One-to-four family |  |  | 3 |  |  |  | 477 |  |  |  | 636 |  |  |  | 3.62 |  |  |  | 3.07 |  |  |  | — |  |  |  | 6 |
Commercial and industrial |  |  | 2 |  |  | $ | 1,397 |  |  | $ | 1,300 |  |  |  | 3.30 |  |  |  | 3.20 |  |  |  | 47 |  |  |  | — |
Total |  |  | 6 |  |  | $ | 11,214 |  |  | $ | 10,439 |  |  |  |  |  |  |  |  |  |  | $ | 47 |  |  | $ | 6 |
At June 30, 2017, one non-covered one-to-four family loan, in the amount of $255,000, that had been modified as a TDR during the twelve months ended at that date was in payment default. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. The Company does not consider a payment to be in default when the loan is in forbearance, or otherwise granted a delay of payment, when the agreement to forebear or allow a delay of payment is part of a modification. Subsequent to the modification, the loan is not considered to be in default until payment is contractually past due in accordance with the modified terms. However, the Company does consider a loan with multiple modifications or forbearance periods to be in default, and would also consider a loan to be in default if the borrower were in bankruptcy or if the loan were partially charged off subsequent to modification. Covered Loans The following table presents the carrying value of held-for-sale covered loans which were acquired in the acquisitions of AmTrust and Desert Hills Bank (“Desert Hills”) as of June 30, 2017:
(dollars in thousands) |  | Amount |  |  | Percent of Covered Loans Held for Sale |
Loan Category: |  |  |  |  |  |  |  |
One-to-four family |  | $ | 1,433,324 |  |  |  | 96.8 | %
Other loans |  |  | 47,409 |  |  |  | 3.2 |
Total covered loans held for sale |  | $ | 1,480,733 |  |  |  | 100.0 | %
The Company refers to certain loans acquired in the AmTrust and Desert Hills transactions as “covered loans” because the Company is being reimbursed for a substantial portion of losses on these loans under the terms of the FDIC LSA. Covered loans are accounted for under ASC 310-30 and are initially measured at fair value, which includes estimated future credit losses expected to be incurred over the lives of the loans. Under ASC 310-30, purchasers are permitted to aggregate acquired loans into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. At June 30, 2017 and December 31, 2016, the unpaid principal balance of covered loans was $1.8 billion and $2.1 billion, respectively. The carrying value of such loans was $1.5 billion and $1.7 billion at the corresponding dates. At the respective acquisition dates, the Company estimated the fair values of the AmTrust and Desert Hills loan portfolios, which represented the expected cash flows from the portfolios, discounted at market-based rates. In estimating such fair values, the Company: (a) calculated the contractual amount and timing of undiscounted principal and interest payments (the “undiscounted contractual cash flows”); and (b) estimated the expected amount and timing of undiscounted principal and interest payments (the “undiscounted expected cash flows”). The amount by which the undiscounted expected cash flows exceed the estimated fair value (the “accretable yield”) is accreted into interest income over the lives of the loans. The amount by which the undiscounted contractual cash flows exceed the undiscounted expected cash flows is referred to as the “non-accretable difference.” The non-accretable difference represents an estimate of the credit risk in the loan portfolios at the respective acquisition dates. The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment assumptions, and changes in expected principal and interest payments over the estimated lives of the loans. Changes in interest rate indices for variable rate loans increase or decrease the amount of interest income expected to be collected, depending on the direction of interest rates. Prepayments affect the estimated lives of covered loans and could change the amount of interest income and principal expected to be collected. Changes in expected principal and interest payments over the estimated lives of covered loans are driven by the credit outlook and by actions that may be taken with borrowers. On a quarterly basis, the Company evaluates the estimates of the cash flows it expects to collect. Expected future cash flows from interest payments are based on variable rates at the time of the quarterly evaluation. Estimates of expected cash flows that are impacted by changes in interest rate indices for variable rate loans and prepayment assumptions are treated as prospective yield adjustments and included in interest income. In the six months ended June 30, 2017, changes in the accretable yield for covered loans were as follows:
(in thousands) |  | Accretable Yield |
Balance at beginning of period |  | $ | 647,470 |
Reclassification to non-accretable difference |  |  | (11,381 | )
Accretion |  |  | (62,625 | )
Balance at end of period |  | $ | 573,464 |
In the preceding table, the line item “Reclassification to non-accretable difference” includes changes in cash flows that the Company expects to collect due to changes in prepayment assumptions, changes in interest rates on variable rate loans, and changes in loss assumptions. As of the Company’s most recent quarterly evaluation, prepayment assumptions increased, which resulted in a decrease in future expected interest cash flows and, consequently, a decrease in the accretable yield. The effect of this decrease was partially offset with an improvement in the underlying credit assumptions and the resetting of rates on variable rate loans at a slightly higher level, which resulted in an increase in future expected interest cash flows and, consequently, an increase in the accretable yield. Reflecting the foreclosure of certain loans acquired in the AmTrust and Desert Hills acquisitions, the Company owns certain other real estate owned (“OREO”) that is covered under its LSA with the FDIC (“covered OREO”). Covered OREO was initially recorded at its estimated fair value on the respective dates of acquisition, based on independent appraisals, less the estimated selling costs. Any subsequent write-downs due to declines in fair value have been charged to non-interest expense, and have been partially offset by loss reimbursements under the FDIC loss sharing agreements. Any recoveries of previous write-downs have been credited to non-interest expense and partially offset by the portion of the recovery that was due to the FDIC. The FDIC loss share receivable represents the present value of the estimated losses to be reimbursed by the FDIC. The estimated losses were based on the same cash flow estimates used in determining the fair value of the covered loans. The FDIC loss share receivable is reduced as losses on covered loans are recognized and as loss sharing payments are received from the FDIC. Realized losses in excess of acquisition-date estimates result in an increase in the FDIC loss share receivable. Conversely, if realized losses are lower than the acquisition-date estimates, the FDIC loss share receivable is reduced by amortization to interest income. At June 30, 2017 and December 31, 2016, respectively, the Company held residential mortgage loans of $71.6 million and $78.6 million that were in the process of foreclosure. The vast majority of such loans were covered loans. The following table presents information regarding the Company’s covered loans (which, as of June 30, 2017 are classified as held for sale) that were 90 days or more past due at the dates indicated:
(in thousands) |  | June 30, 2017 |  |  | December 31, 2016 |
Covered Loans 90 Days or More Past Due: |  |  |  |  |  |  |  |
One-to-four family |  | $ | 120,815 |  |  | $ | 124,820 |
Other loans |  |  | 8,278 |  |  |  | 6,645 |
Total covered loans 90 days or more past due |  | $ | 129,093 |  |  | $ | 131,465 |
The following table presents information regarding the Company’s covered loans (which, as of June 30, 2017 are classified as held for sale) that were 30 to 89 days past due at the dates indicated:
(in thousands) |  | June 30, 2017 |  |  | December 31, 2016 |
Covered Loans 30-89 Days Past Due: |  |  |  |  |  |  |  |
One-to-four family |  | $ | 17,718 |  |  | $ | 21,112 |
Other loans |  |  | 5,134 |  |  |  | 1,536 |
Total covered loans 30-89 days past due |  | $ | 22,852 |  |  | $ | 22,648 |
At June 30, 2017, the Company had $22.9 million of covered loans that were 30 to 89 days past due, and covered loans of $129.1 million that were 90 days or more past due but considered to be performing due to the application of the yield accretion method under ASC 310-30.The remainder of the Company’s covered loan portfolio totaled $1.3 billion at June 30, 2017 and was considered current at that date. Loans that may have been classified as non-performing loans by AmTrust or Desert Hills were no longer classified as non-performing by the Company because, at the respective dates of acquisition, the Company believed that it would fully collect the new carrying value of these loans. The new carrying value represents the contractual balance, reduced by the portion that is expected to be uncollectible (i.e., the non-accretable difference) and by an accretable yield (discount) that is recognized as interest income. It is important to note that management’s judgment is required in reclassifying loans subject to ASC 310-30 as performing loans, and such judgment is dependent on having a reasonable expectation about the timing and amount of the cash flows to be collected, even if the loan is contractually past due. The primary credit quality indicator for covered loans is the expectation of underlying cash flows. In the three and six months ended June 30, 2017, the Company recorded recoveries of losses on covered loans of $17.9 million and $23.7 million, respectively. The recoveries were largely due to an increase in expected cash flows in the acquired portfolios of one-to-four family and home equity loans, and were partly offset by FDIC indemnification expense of $14.3 million and $19.0 million respectively, that was recorded in “Non-interest income.” In the three and six months ended June 30, 2016, the Company recorded recoveries of losses on covered loans of $1.8 million and $4.7 million, respectively. The recoveries were largely due to an increase in expected cash flows in the acquired portfolios of one-to-four family and home equity loans, and were partly offset by FDIC indemnification expense of $1.5 million and $3.8 million respectively, that was recorded in “Non-interest income.”

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5066-111524 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02(4)) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.6-04(6)) -URI http://asc.fasb.org/extlink&oid=6488278&loc=d3e603758-122996 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02(3)) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5162-111524 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03(a)(5)) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.9-03(7)) -URI http://asc.fasb.org/extlink&oid=6876686&loc=d3e534808-122878 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 310 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=84173941&loc=d3e5074-111524 + Details
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