LOANS

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

LOANS

3. LOANS

The following table presents loans outstanding, by type of loan, as of December 31:

			% of Total					% of Total
(Dollars in thousands)	2017		Loans			2016		Loans
Residential mortgage	$	576,356		15.56	%	$	527,370		15.92	%
Multifamily mortgage		1,388,958		37.49			1,459,594		44.07
Commercial mortgage		626,656		16.92			551,233		16.65
Commercial loans		958,294		25.87			636,714		19.23
Construction loans		—		—			1,405		0.04
Home equity lines of credit		67,497		1.82			65,682		1.98
Consumer loans, including
fixed rate home equity loans		86,277		2.33			69,654		2.10
Other loans		402		0.01			492		0.01
Total loans	$	3,704,440		100.00	%	$	3,312,144		100.00	%

In determining an appropriate amount for the allowance, the Bank segments and evaluates the loan portfolio based on Federal call report codes. The following portfolio classes have been identified as of December 31:

			% of Total					% of Total
(Dollars in thousands)	2017		Loans			2016		Loans
Primary residential mortgage	$	605,569		16.35	%	$	557,970		16.86	%
Home equity lines of credit		67,497		1.82			65,683		1.98
Junior lien loan on residence		7,073		0.19			9,206		0.28
Multifamily property		1,388,958		37.51			1,459,594		44.09
Owner-occupied commercial
real estate		253,492		6.85			176,123		5.32
Investment commercial real estate		874,098		23.61			752,258		22.73
Commercial and industrial		316,294		8.54			213,983		6.47
Lease financing		90,052		2.43			—		—
Farmland/Agricultural production		160		0.01			169		0.01
Commercial construction		92		0.01			1,497		0.04
Consumer and other		99,247		2.68			73,621		2.22
Total loans	$	3,702,532		100.00	%	$	3,310,104		100.00	%
Net deferred costs		1,908					2,040
Total loans including
net deferred costs	$	3,704,440				$	3,312,144

Loans are transferred from the loan portfolio to held for sale when the Company no longer has the intent to hold the loans for the foreseeable future.

The Company sold approximately $109 million in residential and multifamily whole loans during 2017. Gain on sale of whole loans sold in 2017 totaled approximately $412 thousand. In 2016, the Company sold $234 million in multifamily loans. The loans sold in 2016 include both whole loan sales and loan participations. Gain on sale of whole loans sold in 2016 totaled approximately $1.2 million and none of the loans were sold at a loss.

During 2016, the Company transferred $30.1 million of loans from held for sale back to the loan portfolio. These loans were transferred at lower of cost or fair value. No loss was recognized on the transfer.

The Company, through the Bank, may extend credit to officers, directors or their associates. These loans are subject to the Company’s normal lending policy and Federal Reserve Bank Regulation O.

The following table shows the changes in loans to officers, directors or their associates:

(In thousands)	2017			2016
Balance, beginning of year	$	4,788		$	4,280
New loans		511			1,329
Repayments		(611	)		(697	)
Loans with individuals no longer considered related parties		—			(124	)
Balance, at end of year	$	4,688		$	4,788

The following tables present the loan balances by portfolio segment, based on impairment method, and the corresponding balances in the allowance for loan losses as of December 31, 2017 and 2016:

December 31, 2017
	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		to Loans		Collectively		to Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	for		Evaluated for		for		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential
mortgage	$	9,802	$	482	$	595,767	$	3,603	$	605,569	$	4,085
Home equity lines
of credit		27		—		67,470		221		67,497		221
Junior lien loan
on residence		52		—		7,021		12		7,073		12
Multifamily
property		—		—		1,388,958		10,007		1,388,958		10,007
Owner-occupied
commercial
real estate		2,503		—		250,989		2,385		253,492		2,385
Investment
commercial
real estate		10,681		40		863,417		11,893		874,098		11,933
Commercial and
industrial		—		—		316,294		6,563		316,294		6,563
Lease financing		—		—		90,052		884		90,052		884
Secured by
farmland and
agricultural
production		—		—		160		—		160		—
Commercial
construction		—		—		92		1		92		1
Consumer and
other		—		—		99,247		349		99,247		349
Total ALLL	$	23,065	$	522	$	3,679,467	$	35,918	$	3,702,532	$	36,440

December 31, 2016

	Total		Ending ALLL		Total		Ending ALLL
	Loans		Attributable		Loans		Attributable
	Individually		to Loans		Collectively		to Loans
	Evaluated		Individually		Evaluated		Collectively				Total
	for		Evaluated for		for		Evaluated for		Total		Ending
(In thousands)	Impairment		Impairment		Impairment		Impairment		Loans		ALLL
Primary residential
mortgage	$	15,814	$	456	$	542,156	$	3,210	$	557,970	$	3,666
Home equity
lines of credit		53		—		65,630		233		65,683		233
Junior lien loan
on residence		229		—		8,977		16		9,206		16
Multifamily
property		—		—		1,459,594		11,192		1,459,594		11,192
Owner-occupied
commercial
real estate		1,486		—		174,637		1,774		176,123		1,774
Investment
commercial
real estate		11,335		214		740,923		10,695		752,258		10,909
Commercial and
industrial		154		154		213,829		4,010		213,983		4,164
Secured by
farmland and
agricultural
production		—		—		169		2		169		2
Commercial
construction		—		—		1,497		9		1,497		9
Consumer and
other		—		—		73,621		243		73,621		243
Total ALLL	$	29,071	$	824	$	3,281,033	$	31,384	$	3,310,104	$	32,208

Impaired loans include nonaccrual loans of $13.5 million at December 31, 2017 and $11.3 million at December 31, 2016. Impaired loans also include performing troubled debt restructured loans of $9.5 million at December 31, 2017 and $17.8 million at December 31, 2016. At December 31, 2017, the allowance allocated to troubled debt restructured loans totaled $423 thousand of which $173 thousand was allocated to nonaccrual loans. At December 31, 2016, the allowance allocated to troubled debt restructured loans totaled $550 thousand of which $314 thousand was allocated to nonaccrual loans. All accruing troubled debt restructured loans were paying in accordance with restructured terms as of December 31, 2017. The Company has not committed to lend additional amounts as of December 31, 2017 to customers with outstanding loans that are classified as loan restructurings.

The following tables present loans individually evaluated for impairment by class of loans as of December 31, 2017 and 2016:

	December 31, 2017
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	9,607	$	8,388	$	—	$	10,847
Owner-occupied commercial real estate		3,238		2,503		—		1,568
Investment commercial real estate		9,564		9,500		—		9,971
Home equity lines of credit		29		27		—		38
Junior lien loan on residence		110		52		—		92
Total loans with no related allowance	$	22,548	$	20,470	$	—	$	22,516
With related allowance recorded:
Primary residential mortgage	$	1,435	$	1,414	$	482	$	1,399
Investment commercial real estate		1,181		1,181		40		1,198
Total loans with related allowance	$	2,616	$	2,595	$	522	$	2,597
Total loans individually evaluated
for impairment	$	25,164	$	23,065	$	522	$	25,113

	December 31, 2016
	Unpaid						Average
	Principal		Recorded		Specific		Impaired
(In thousands)	Balance		Investment		Reserves		Loans
With no related allowance recorded:
Primary residential mortgage	$	16,015	$	14,090	$	—	$	10,038
Owner-occupied commercial real estate		1,597		1,486		—		1,450
Investment commercial real estate		9,711		9,711		—		9,974
Home equity lines of credit		56		53		—		143
Junior lien loan on residence		280		229		—		339
Total loans with no related allowance	$	27,659	$	25,569	$	—	$	21,944
With related allowance recorded:
Primary residential mortgage	$	1,787	$	1,724	$	456	$	1,678
Investment commercial real estate		1,640		1,624		214		1,642
Commercial and industrial		204		154		154		145
Total loans with related allowance	$	3,631	$	3,502	$	824	$	3,465
Total loans individually evaluated
for impairment	$	31,290	$	29,071	$	824	$	25,409

Average impaired loans were $21.2 million as of December 31, 2015.

Interest income recognized on impaired loans during 2017, 2016 and 2015 was not material.

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2017 and 2016:

	December 31, 2017
			Loans Past Due Over
			90 Days and Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	6,056	$	—
Home equity lines of credit		6		—
Junior lien loan on residence		52		—
Owner-occupied commercial real estate		2,503		—
Investment commercial real estate		4,913		—
Total	$	13,530	$	—

	December 31, 2016
			Loans Past Due Over
			90 Days and Still
(In thousands)	Nonaccrual		Accruing Interest
Primary residential mortgage	$	9,071	$	—
Home equity lines of credit		30		—
Junior lien loan on residence		115		—
Owner-occupied commercial real estate		1,486		—
Investment commercial real estate		408		—
Commercial and industrial		154		—
Total	$	11,264	$	—

The following tables present the recorded investment in past due loans as of December 31, 2017 and 2016 by class of loans, excluding nonaccrual loans:

	December 31, 2017
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	216	$	—	$	—	$	216
Consumer and other		30		—		—		30
Total	$	246	$	—	$	—	$	246

	December 31, 2016
	30-59		60-89		Greater Than
	Days		Days		90 Days		Total
(In thousands)	Past Due		Past Due		Past Due		Past Due
Primary residential mortgage	$	620	$	480	$	—	$	1,100
Junior lien loan on residence		—		25		—		25
Owner-occupied commercial real estate		209		—		—		209
Commercial and industrial		22		—		—		22
Total	$	851	$	505	$	—	$	1,356

Credit Quality Indicators:

The Company places all commercial loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.

In addition, the Bank has engaged an independent loan review firm to validate risk ratings and to ensure compliance with our policies and procedures. This review of the following types of loans is performed quarterly:

· All new relationships or new lending to existing relationships greater than $1,000,000;

· All criticized and classified rated borrowers with relationship exposure of more than $500,000;

· A large sample of borrowers with total relationship commitments in excess of $1,000,000;

· A random sample of borrowers with relationships less than $1,000,000;

· Any other credits requested by Bank senior management or a member of the Board of Directors and any borrower for which the reviewer determines a review is warranted based upon knowledge of the portfolio, local events, industry stresses, etc.

The Company uses the following regulatory definitions for criticized and classified risk ratings:

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass-rated loans.

Loans that are considered to be impaired are individually evaluated for potential loss and allowance adequacy. Loans not deemed impaired are collectively evaluated for potential loss and allowance adequacy.

The table below presents, based on the most recent analysis performed, the risk category of loans by class of loans for December 31, 2017 and 2016.

December 31, 2017

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	594,846	$	866	$	9,857	$	—
Home equity lines of credit		67,470		—		27		—
Junior lien loan on residence		7,021		—		52		—
Multifamily property		1,371,825		16,755		378		—
Owner-occupied commercial real estate		249,003		837		3,652		—
Investment commercial real estate		827,558		23,377		23,163		—
Commercial and industrial		306,341		7,488		2,465		—
Lease financing		90,052		—		—		—
Secured by farmland and agricultural		160		—		—		—
Commercial construction		—		92		—		—
Consumer and other loans		97,135		—		2,112		—
Total	$	3,611,411	$	49,415	$	41,706	$	—

December 31, 2016

			Special
(In thousands)	Pass		Mention		Substandard		Doubtful
Primary residential mortgage	$	541,359	$	660	$	15,951	$	—
Home equity lines of credit		65,630		—		53		—
Junior lien loan on residence		8,977		—		229		—
Multifamily property		1,456,328		2,867		399		—
Owner-occupied commercial real estate		170,851		—		5,272		—
Investment commercial real estate		724,203		5,116		22,939		—
Commercial and industrial		208,617		4,411		955		—
Secured by farmland and agricultural		169		—		—		—
Commercial construction		1,400		97		—		—
Consumer and other loans		73,621		—		—		—
Total	$	3,251,155	$	13,151	$	45,798	$	—

At December 31, 2017, $21.8 million of substandard loans were also considered impaired as compared to December 31, 2016, when $27.9 million of the special mention and the substandard loans were also considered impaired.

The tables below present a roll forward of the allowance for loan losses for the years ended December 31, 2017, 2016 and 2015.

	January 1,										December 31,
	2017										2017
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-Offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	3,666	$	(889	)	$	173	$	1,135		$	4,085
Home equity lines of credit		233		(23	)		62		(51	)		221
Junior lien loan on residence		16		(99	)		26		69			12
Multifamily property		11,192		—			—		(1,185	)		10,007
Owner-occupied commercial
real estate		1,774		(734	)		—		1,345			2,385
Investment commercial real estate		10,909		(123	)		23		1,124			11,933
Commercial and industrial		4,164		(76	)		115		2,360			6,563
Lease financing		—		—			—		884			884
Secured by farmland and agricultural		2		—			—		(2	)		—
Commercial construction		9		—			—		(8	)		1
Consumer and other		243		(77	)		4		179			349
Total ALLL	$	32,208	$	(2,021	)	$	403	$	5,850		$	36,440

	January 1,										December 31,
	2016										2016
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-Offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,297	$	(1,047	)	$	28	$	2,388		$	3,666
Home equity lines of credit		86		(91	)		15		223			233
Junior lien loan on residence		66		—			140		(190	)		16
Multifamily property		11,813		—			—		(621	)		11,192
Owner-occupied commercial
real estate		1,679		(11	)		72		34			1,774
Investment commercial real estate		7,590		(520	)		246		3,593			10,909
Commercial and industrial		2,209		(16	)		29		1,942			4,164
Secured by farmland and agricultural		2		—			—		—			2
Commercial construction		2		—			—		7			9
Consumer and other		112		(5	)		12		124			243
Total ALLL	$	25,856	$	(1,690	)	$	542	$	7,500		$	32,208

	January 1,										December 31,
	2015										2015
	Beginning							Provision			Ending
(In thousands)	ALLL		Charge-Offs			Recoveries		(Credit)			ALLL
Primary residential mortgage	$	2,923	$	(638	)	$	80	$	(68	)	$	2,297
Home equity lines of credit		156		(210	)		2		138			86
Junior lien loan on residence		109		(13	)		62		(92	)		66
Multifamily property		8,983		—			—		2,830			11,813
Owner-occupied commercial
real estate		1,547		—			11		121			1,679
Investment commercial real estate		4,751		(16	)		18		2,837			7,590
Commercial and industrial		880		(73	)		81		1,321			2,209
Secured by farmland and agricultural		4		—			—		(2	)		2
Commercial construction		31		—			—		(29	)		2
Consumer and other		96		(41	)		13		44			112
Total ALLL	$	19,480	$	(991	)	$	267	$	7,100		$	25,856

Troubled Debt Restructurings: The Company has allocated $423 thousand and $550 thousand of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2017 and December 31, 2016, respectively. There were no unfunded commitments to lend additional amounts to customers with outstanding loans that are classified as troubled debt restructurings.

During the period ended December 31, 2017, 2016 and 2015, the terms of certain loans were modified as troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; or an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk.

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2017:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		6	$	1,223	$	1,223
Total		6	$	1,223	$	1,223

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2016:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		7	$	4,691	$	4,691
Junior lien loan on residence		1		63		63
Commercial and industrial		1		26		26
Total		9	$	4,780	$	4,780

The following table presents loans by class modified as troubled debt restructurings that occurred during the year ended December 31, 2015:

			Pre-Modification		Post-Modification
			Outstanding		Outstanding
	Number of		Recorded		Recorded
(Dollars in thousands)	Contracts		Investment		Investment
Primary residential mortgage		11	$	3,296	$	3,296
Junior lien loan on residence		1		58		58
Investment commercial real estate		1		750		750
Total		13	$	4,104	$	4,104

The identification of the troubled debt restructured loans did not have a significant impact on the allowance for loan losses. In addition, there were no charge-offs as a result of the classification of these loans as troubled debt restructuring during the years ended December 31, 2017, 2016 and 2015.

The following table presents loans by class modified as troubled debt restructurings during the year ended December 31, 2017 for which there was a payment default during the same period:

	Number of		Recorded
(Dollars in thousands)	Contracts		Investment
Primary residential mortgage		1	$	336
Total		1	$	336

The following table presents loans by class modified as troubled debt restructurings during the year ended December 31, 2016 for which there was a payment default during the same period:

	Number of		Recorded
(Dollars in thousands)	Contracts		Investment
Primary residential mortgage		1	$	269
Total		1	$	269

There were no payment defaults on loans modified as troubled debt restructurings within twelve months of modification during the year ended December 31, 2015.

The defaults described above did not have a material impact on the allowance for loan losses during 2017 and 2016.

In order 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. The modification of the terms of such loans may include one or more of the following: (1) a reduction of the stated interest rate of the loan to a rate that is lower than the current market rate for new debt with similar risk; (2) an extension of an interest only period for a predetermined period of time; (3) an extension of the maturity date; or (4) an extension of the amortization period over which future payments will be computed. At the time a loan is restructured, the Bank performs a full re-underwriting analysis, which includes, at a minimum, obtaining current financial statements and tax returns, copies of all leases, and an updated independent appraisal of the property. A loan will continue to accrue interest if it can be reasonably determined that the borrower should be able to perform under the modified terms, that the loan has not been chronically delinquent (both to debt service and real estate taxes) or in nonaccrual status since its inception, and that there have been no charge-offs on the loan. Restructured loans with previous charge-offs would not accrue interest at the time of the troubled debt restructuring. At a minimum, six months of contractual payments would need to be made on a restructured loan before returning it to accrual status. Once a loan is classified as a TDR, the loan is reported as a TDR until the loan is paid in full, sold or charged-off. In rare circumstances, a loan may be removed from TDR status, if it meets the requirements of ASC 310-40-50-2.