Loans Receivable (Notes)

6 Months Ended

Jun. 30, 2019

Loans receivable are as follows:



	June 30, 2019			December 31, 2018
One-to-four family residential real estate	$	64,192		$	70,371
Multi-family mortgage	619,898			619,870
Nonresidential real estate	145,416			152,442
Construction and land	117			172
Commercial loans	153,709			187,406
Commercial leases	289,107			299,394
Consumer	1,861			1,539
	1,274,300			1,331,194
Net deferred loan origination costs	978			1,069
Allowance for loan losses	(7,824		)	(8,470		)
Loans, net	$	1,267,454		$	1,323,793

The following tables present the balance in the allowance for loan losses and the loans receivable by portfolio segment and based on impairment method:



	Allowance for loan losses						Loan Balances
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
June 30, 2019
One-to-four family residential real estate	$	—	$	563	$	563	$	2,420	$	61,772	$	64,192
Multi-family mortgage	—		3,988		3,988		637		619,261		619,898
Nonresidential real estate	—		1,195		1,195		2,083		143,333		145,416
Construction and land	—		3		3		—		117		117
Commercial loans	—		1,294		1,294		—		153,709		153,709
Commercial leases	—		750		750		—		289,107		289,107
Consumer	—		31		31		—		1,861		1,861
	$	—	$	7,824	$	7,824	$	5,140	$	1,269,160	1,274,300
Net deferred loan origination costs											978
Allowance for loan losses											(7,824		)
Loans, net											$	1,267,454



	Allowance for loan losses						Loan Balances
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
December 31, 2018
One-to-four family residential real estate	$	—	$	699	$	699	$	2,218	$	68,153	$	70,371
Multi-family mortgage	—		3,991		3,991		653		619,217		619,870
Nonresidential real estate	27		1,449		1,476		270		152,172		152,442
Construction and land	—		4		4		—		172		172
Commercial loans	—		1,517		1,517		—		187,406		187,406
Commercial leases	—		755		755		—		299,394		299,394
Consumer	—		28		28		—		1,539		1,539
	$	27	$	8,443	$	8,470	$	3,141	$	1,328,053	1,331,194
Net deferred loan origination costs											1,069
Allowance for loan losses											(8,470		)
Loans, net											$	1,323,793

Activity in the allowance for loan losses is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Beginning balance	$	8,354		$	8,341		$	8,470		$	8,366
Loans charged off:
One-to-four family residential real estate	(50		)	(33		)	(73		)	(130		)
Multi-family mortgage	—			(35		)	—			(35		)
Nonresidential real estate	—			—			(28		)	—
Commercial loans	(4,443		)	(140		)	(4,443		)	(140		)
Consumer	(10		)	(1		)	(15		)	(1		)
	(4,503		)	(209		)	(4,559		)	(306		)
Recoveries:
One-to-four family residential real estate	6			6			23			105
Multi-family mortgage	8			10			16			18
Commercial loans	2			2			4			225
Commercial leases	—			5			—			5
Consumer	—			1			—			1
	16			24			43			354
Net (charge-offs) recoveries	(4,487		)	(185		)	(4,516		)	48
Provision for (recovery of) loan losses	3,957			23			3,870			(235		)
Ending balance	$	7,824		$	8,179		$	7,824		$	8,179

Impaired loans

Several of the following disclosures are presented by “recorded investment,” which the FASB defines as “the amount of the investment in a loan, which is not net of a valuation allowance, but which does reflect any direct write-down of the investment.” The following represents the components of recorded investment:

Loan principal balance

Less unapplied payments

Plus negative unapplied balance

Less escrow balance

Plus negative escrow balance

Plus unamortized net deferred loan costs

Less unamortized net deferred loan fees

Plus unamortized premium

Less unamortized discount

Less previous charge-offs

Plus recorded accrued interest

Less reserve for uncollected interest

= Recorded investment

The following tables present loans individually evaluated for impairment by class of loans:



									Three months ended June 30, 2019				Six months ended June 30, 2019
	Loan Balance		Recorded Investment		Partial Charge-off		Allowance for Loan Losses Allocated		Average Investment in Impaired Loans		Interest Income Recognized		Average Investment in Impaired Loans		Interest Income Recognized
June 30, 2019
With no related allowance recorded:
One-to-four family residential real estate	$	2,818	$	2,227	$	564	$	—	$	2,263	$	12	$	2,238	$	26
One-to-four family residential real estate - non-owner occupied	221		169		56		—		101		—		77		1
Multi-family mortgage - Illinois	637		635		—		—		642		9		646		19
Nonresidential real estate	2,197		2,080		121		—		771		—		441		27
	$	5,873	$	5,111	$	741	$	—	$	3,777	$	21	$	3,402	$	73



									Year ended December 31, 2018
	Loan Balance		Recorded Investment		Partial Charge-off		Allowance for Loan Losses Allocated		Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2018
With no related allowance recorded:
One-to-four family residential real estate	$	2,751	$	2,155	$	575	$	—	$	3,274	$	41
One-to-four family residential real estate - non-owner occupied	86		46		43		—		95		—
Multi-family mortgage - Illinois	654		653		—		—		795		39
	3,491		2,854		$	618	—		4,164		80
With an allowance recorded - Nonresidential real estate	356		270		93		27		21		—
	$	3,847	$	3,124	$	711	$	27	$	4,185	$	80

Nonaccrual Loans

The following tables present the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans:



	Loan Balance		Recorded Investment		Loans Past Due Over 90 Days, Still Accruing
June 30, 2019
One-to-four family residential real estate	$	1,028	$	754	$	—
One-to-four family residential real estate – non-owner occupied	222		169		—
Nonresidential real estate	2,197		2,080		—
	$	3,447	$	3,003	$	—
December 31, 2018
One-to-four family residential real estate	$	2,167	$	1,162	$	—
One-to-four family residential real estate – non-owner occupied	270		78		—
Nonresidential real estate	356		270		—
	$	2,793	$	1,510	$	—

Nonaccrual loans and impaired loans are defined differently. Some loans may be included in both categories, and some loans may only be included in one category. Nonaccrual loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.

The Company’s reserve for uncollected loan interest was $149,000 and $72,000 at June 30, 2019 and December 31, 2018, respectively. When a loan is on nonaccrual status and the ultimate collectability of the total principal of an impaired loan is in doubt, all payments are applied to principal under the cost recovery method. Alternatively, when a loan is on non-accrual status but there is doubt concerning only the ultimate collectability of interest, contractual interest is credited to interest income only when received, under the cash basis method pursuant to the provisions of FASB ASC 310–10, as applicable. In all cases, the average balances are calculated based on the month–end balances of the financing receivables within the period reported pursuant to the provisions of FASB ASC 310–10, as applicable.

Past Due Loans

The following tables present the aging of the recorded investment of loans at June 30, 2019 by class of loans:



	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total
One-to-four family residential real estate loans	$	123	$	230	$	748	$	1,101	$	50,724	$	51,825
One-to-four family residential real estate loans – non-owner occupied	362		8		170		540		11,412		11,952
Multi-family mortgage - Illinois	—		—		—		—		264,086		264,086
Multi-family mortgage - Other	—		—		—		—		348,878		348,878
Nonresidential real estate	—		1,560		520		2,080		140,692		142,772
Construction and land	—		—		—		—		111		111
Commercial loans:
Regional commercial banking	—		—		—		—		29,568		29,568
Health care	—		—		—		—		80,022		80,022
Direct commercial lessor	—		—		—		—		44,620		44,620
Commercial leases:
Investment rated commercial leases	—		—		—		—		144,380		144,380
Other commercial leases	3,052		32		—		3,084		143,727		146,811
Consumer	3		1		—		4		1,872		1,876
	$	3,540	$	1,831	$	1,438	$	6,809	$	1,260,092	$	1,266,901

The following tables present the aging of the recorded investment of loans at December 31, 2018 by class of loans:



	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Loans Not Past Due		Total
One-to-four family residential real estate loans	$	1,380	$	637	$	1,162	$	3,179	$	53,820	$	56,999
One-to-four family residential real estate loans – non-owner occupied	387		10		78		475		12,460		12,935
Multi-family mortgage - Illinois	458		—		—		458		275,283		275,741
Multi-family mortgage - Other	—		—		—		—		340,470		340,470
Nonresidential real estate	—		270		—		270		149,271		149,541
Construction and land	—		—		—		—		169		169
Commercial loans:
Regional commercial banking	—		—		—		—		39,712		39,712
Health care	—		—		—		—		85,418		85,418
Direct commercial lessor	—		—		—		—		62,719		62,719
Commercial leases:
Investment rated commercial leases	505		—		—		505		166,713		167,218
Other commercial leases	—		—		—		—		133,958		133,958
Consumer	40		4		—		44		1,508		1,552
	$	2,770	$	921	$	1,240	$	4,931	$	1,321,501	$	1,326,432

Troubled Debt Restructurings

The Company evaluates loan extensions or modifications in accordance with FASB ASC 310–40 with respect to the classification of the loan as a Troubled Debt Restructuring ("TDR"). In general, if the Company grants a loan extension or modification to a borrower experiencing financial difficulties for other than an insignificant period of time that includes a below–market interest rate, principal forgiveness, payment forbearance or other concession intended to minimize the economic loss to the Company, the loan extension or loan modification is classified as a TDR. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal then due and payable, management measures any impairment on the restructured loan in the same manner as for impaired loans as noted above.

The Company had $17,000 of TDRs at June 30, 2019 and December 31, 2018. No specific valuation reserves were allocated to those loans at June 30, 2019 and December 31, 2018. The Company had no outstanding commitments to borrowers whose loans were classified as TDRs at either date.

The following table presents loans classified as TDRs:



	June 30, 2019		December 31, 2018
One-to-four family residential real estate - nonaccrual	$	17	$	17

During the six months ended June 30, 2019 and 2018, there were no loans modified and classified as TDRs. During the six months ended June 30, 2019 and 2018, there were no TDR loans that subsequently defaulted within twelve months of their modification.

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

To determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans based on credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Special Mention. A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans categorized as Substandard continue to accrue interest, but exhibit a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. The loans continue to accrue interest because they are well secured and collection of principal and interest is expected within a reasonable time. The risk rating guidance published by the Office of the Comptroller of the Currency clarifies that a loan with a well-defined weakness does not have to present a probability of default for the loan to be rated Substandard, and that an individual loan’s loss potential does not have to be distinct for the loan to be rated Substandard.

Nonaccrual. An asset classified Nonaccrual has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered “Pass” rated loans.

As of June 30, 2019, the risk categories of loans by class of loans are as follows:



	Pass		Special Mention		Substandard		Nonaccrual		Total
One-to-four family residential real estate loans	$	50,853	$	111	$	451	$	750	$	52,165
One-to-four family residential real estate loans – non-owner occupied	11,791		31		36		169		12,027
Multi-family mortgage - Illinois	267,128		—		213		—		267,341
Multi-family mortgage - Other	352,557		—		—		—		352,557
Nonresidential real estate	143,240		—		93		2,083		145,416
Construction and land	117		—		—		—		117
Commercial loans:
Regional commercial banking	29,514		—		—		—		29,514
Health care	79,042		264		500		—		79,806
Direct commercial lessor	44,389		—		—		—		44,389
Commercial leases:
Investment rated commercial leases	142,543		605		—		—		143,148
Other commercial leases	143,839		2,120		—		—		145,959
Consumer	1,855		5		1		—		1,861
	$	1,266,868	$	3,136	$	1,294	$	3,002	$	1,274,300

As of December 31, 2018, the risk categories of loans by class of loans are as follows:



	Pass		Special Mention		Substandard		Nonaccrual		Total
One-to-four family residential real estate loans	$	55,353	$	495	$	328	$	993	$	57,169
One-to-four family residential real estate loans – non-owner occupied	12,911		—		37		254		13,202
Multi-family mortgage - Illinois	279,021		—		216		—		279,237
Multi-family mortgage - Other	340,633		—		—		—		340,633
Nonresidential real estate	151,793		281		98		270		152,442
Construction and land	172		—		—		—		172
Commercial loans:
Regional commercial banking	34,764		4,810		—		—		39,574
Health care	85,001		—		342		—		85,343
Direct commercial lessor	62,489		—		—		—		62,489
Commercial leases:
Investment rated commercial leases	165,508		701		—		—		166,209
Other commercial leases	133,185		—		—		—		133,185
Consumer	1,529		3		7		—		1,539
	$	1,322,359	$	6,290	$	1,028	$	1,517	$	1,331,194

- 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.

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