Loans And Allowance For Loan Losses | LOANS AND ALLOWANCE FOR LOAN LOSSES Loans held for investment consist of the following: September 30, 2017 2016 Real estate loans: Residential Core $ 10,746,204 $ 10,069,652 Residential Home Today 108,964 121,938 Home equity loans and lines of credit 1,552,315 1,531,282 Construction 60,956 61,382 Real estate loans 12,468,439 11,784,254 Other consumer loans 3,050 3,116 Add (deduct): Deferred loan expenses, net 30,865 19,384 Loans-in-process (“LIP”) (34,100 ) (36,155 ) Allowance for loan losses (48,948 ) (61,795 ) Loans held for investment, net $ 12,419,306 $ 11,708,804 At September 30, 2017 and 2016 , respectively, $351 and $4,686 of long-term, fixed-rate loans were classified as mortgage loans held for sale. A large concentration of the Company’s lending is in Ohio and Florida. As of September 30, 2017 and 2016 , the percentage of total Residential Core, Home Today and Construction loans held in Ohio were 57% and 60% , respectively, and the percentages held in Florida was 16% as of both dates. As of September 30, 2017 and 2016 , home equity loans and lines of credit were concentrated in Ohio ( 39% as of both dates), Florida ( 22% and 24% ) and California ( 13% and 14% ). Home Today was an affordable housing program targeted to benefit low- and moderate-income home buyers and most loans under the program were originated prior to 2009. No new loans were originated under the Home Today program after September 30, 2016. Through this program the Association provided the majority of loans to borrowers who would not otherwise qualify for the Association’s loan products, generally because of low credit scores. Although the credit profiles of borrowers in the Home Today program might be described as sub-prime, Home Today loans generally contained the same features as loans offered to our Residential Core borrowers. Borrowers with a Home Today loan completed financial management education and counseling and were referred to the Association by a sponsoring organization with which the Association partnered as part of the program. Because the Association applied less stringent underwriting and credit standards to the majority of Home Today loans, loans originated under the program have greater credit risk than its traditional residential real estate mortgage loans in the Residential Core portfolio. As of September 30, 2017 and 2016 , the principal balance of Home Today loans originated prior to March 27, 2009 was $105,485 and $118,255 respectively. Since loans are no longer originated under the Home Today program, the Home Today portfolio will continue to decline in balance due to contractual amortization. To supplant the Home Today product and to continue to meet the credit needs of customers and the communities served, during 2016 the Association began to offer Fannie Mae eligible, HomeReady loans. These loans are originated in accordance with Fannie Mae's underwriting standards. While the Association retains the servicing to these loans, the loans, along with the credit risk associated therewith, are securitized/sold to Fannie Mae. The Association does not offer, and has not offered, loan products frequently considered to be designed to target sub-prime borrowers containing features such as higher fees or higher rates, negative amortization, a LTV ratio greater than 100%, or pay-option, adjustable-rate mortgages. The Association currently offers home equity lines of credit that include monthly principal and interest payments throughout the entire term. Home equity lines of credit prior to June 28, 2010 require interest only payments for 10 years, with an option to extend the interest only and draw period another 10 years, at which time they are included in the home equity loan balance. The recorded investment in interest only loans is comprised solely of equity lines of credit with balances of $483,127 and $892,973 for the years ending September 30, 2017 and 2016, respectively. An age analysis of the recorded investment in loan receivables that are past due at September 30, 2017 and 2016 is summarized in the following tables. When a loan is more than one month past due on its scheduled payments, the loan is considered 30 days or more past due. Balances are adjusted for deferred loan fees, expenses and any applicable loans-in-process. 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total September 30, 2017 Real estate loans: Residential Core $ 6,077 $ 2,593 $ 11,975 $ 20,645 $ 10,740,398 $ 10,761,043 Residential Home Today 4,067 1,496 6,851 12,414 95,269 107,683 Home equity loans and lines of credit 4,418 1,952 5,408 11,778 1,558,273 1,570,051 Construction — — — — 26,427 26,427 Total real estate loans 14,562 6,041 24,234 44,837 12,420,367 12,465,204 Other consumer loans — — — — 3,050 3,050 Total $ 14,562 $ 6,041 $ 24,234 $ 44,837 $ 12,423,417 $ 12,468,254 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due Total Past Due Current Total September 30, 2016 Real estate loans: Residential Core $ 6,653 $ 3,157 $ 15,593 $ 25,403 $ 10,054,211 $ 10,079,614 Residential Home Today 5,271 2,583 7,356 15,210 105,225 120,435 Home equity loans and lines of credit 4,605 1,811 4,932 11,348 1,531,242 1,542,590 Construction — — — — 24,844 24,844 Total real estate loans 16,529 7,551 27,881 51,961 11,715,522 11,767,483 Other consumer loans — — — — 3,116 3,116 Total $ 16,529 $ 7,551 $ 27,881 $ 51,961 $ 11,718,638 $ 11,770,599 At September 30, 2017 and 2016, real estate loans include $14,736 and $20,047 , respectively, of loans that were in the process of foreclosure. Loans are placed in non-accrual status when they are contractually 90 days or more past due. Loans restructured in TDRs that were in non-accrual status prior to the restructurings remain in non-accrual status for a minimum of six months after restructuring. Loans where the borrowers' sustained ability to repay is not fully supported at the time of modification are placed in non-accrual status for a minimum of twelve months. Additionally, home equity loans and lines of credit where the customer has a severely delinquent first mortgage loan and loans in Chapter 7 bankruptcy status where all borrowers have filed, and not reaffirmed or been dismissed, are placed in non-accrual status. The recorded investment of loan receivables in non-accrual status is summarized in the following table. Balances are adjusted for deferred loan fees and expenses. September 30, 2017 2016 Real estate loans: Residential Core $ 43,797 $ 51,304 Residential Home Today 18,109 19,451 Home equity loans and lines of credit 17,185 19,206 Total non-accrual loans $ 79,091 $ 89,961 At September 30, 2017 and September 30, 2016 , respectively, the recorded investment in non-accrual loans includes $54,858 and $62,081 which are performing according to the terms of their agreement, of which $34,142 and $40,546 are loans in Chapter 7 bankruptcy status, primarily where all borrowers have filed, and have not reaffirmed or been dismissed. Interest on loans in accrual status, including certain loans individually reviewed for impairment, is recognized in interest income as it accrues, on a daily basis. Accrued interest on loans in non-accrual status is reversed by a charge to interest income and income is subsequently recognized only to the extent cash payments are received. Cash payments on loans in non-accrual status are applied to the oldest scheduled, unpaid payment first. Cash payments on loans with a partial charge-off are applied fully to principal, then to recovery of the charged off amount prior to interest income being recognized. A non-accrual loan is generally returned to accrual status when contractual payments are less than 90 days past due. However, a loan may remain in non-accrual status when collectability is uncertain, such as a TDR that has not met minimum payment requirements, a loan with a partial charge-off, an equity loan or line of credit with a delinquent first mortgage greater than 90 days, or a loan in Chapter 7 bankruptcy status where all borrowers have filed, and have not reaffirmed or been dismissed. The number of days past due is determined by the number of scheduled payments that remain unpaid, assuming a period of 30 days between each scheduled payment. The recorded investment in loan receivables at September 30, 2017 and 2016 is summarized in the following table. The table provides details of the recorded balances according to the method of evaluation used for determining the allowance for loan losses, distinguishing between determinations made by evaluating individual loans and determinations made by evaluating groups of loans not individually evaluated. Balances of recorded investments are adjusted for deferred loan fees, expenses and any applicable loans-in-process. September 30, 2017 2016 Individually Collectively Total Individually Collectively Total Real estate loans: Residential Core $ 94,747 $ 10,666,296 $ 10,761,043 $ 107,541 $ 9,972,073 $ 10,079,614 Residential Home Today 46,641 61,042 107,683 51,415 69,020 120,435 Home equity loans and lines of credit 39,172 1,530,879 1,570,051 35,894 1,506,696 1,542,590 Construction — 26,427 26,427 — 24,844 24,844 Total real estate loans 180,560 12,284,644 12,465,204 194,850 11,572,633 11,767,483 Other consumer loans — 3,050 3,050 — 3,116 3,116 Total $ 180,560 $ 12,287,694 $ 12,468,254 $ 194,850 $ 11,575,749 $ 11,770,599 An analysis of the allowance for loan losses at September 30, 2017 and 2016 is summarized in the following table. The analysis provides details of the allowance for loan losses according to the method of evaluation, distinguishing between allowances for loan losses determined by evaluating individual loans and allowances for loan losses determined by evaluating groups of loans collectively. September 30, 2017 2016 Individually Collectively Total Individually Collectively Total Real estate loans: Residential Core $ 7,336 $ 6,850 $ 14,186 $ 8,927 $ 6,141 $ 15,068 Residential Home Today 2,250 2,258 4,508 2,979 4,437 7,416 Home equity loans and lines of credit 1,475 28,774 30,249 722 38,582 39,304 Construction — 5 5 — 7 7 Total real estate loans $ 11,061 $ 37,887 $ 48,948 $ 12,628 $ 49,167 $ 61,795 At September 30, 2017 and 2016 , individually evaluated loans that required an allowance were comprised only of loans evaluated for impairment based on the present value of cash flows, such as performing TDRs, and loans with a further deterioration in the fair value of collateral not yet identified as uncollectible. All other individually evaluated loans received a charge-off if applicable. Because many variables are considered in determining the appropriate level of general valuation allowances, directional changes in individual considerations do not always align with the directional change in the balance of a particular component of the general valuation allowance. At September 30, 2017 and 2016 , respectively, allowances on individually reviewed loans evaluated for impairment based on the present value of cash flows, such as performing TDRs were $11,061 and $12,432 ; and allowances on loans with further deteriorations in the fair value of collateral not yet identified as uncollectible were $0 and $196 . Residential Core mortgage loans represent the largest portion of the residential real estate portfolio. The Company believes overall credit risk is low based on the nature, composition, collateral, products, lien position and performance of the portfolio. The portfolio does not include loan types or structures that have recently experienced severe performance problems at other financial institutions (sub-prime, no documentation or pay-option adjustable-rate mortgages). As described earlier in this note, Home Today loans have greater credit risk than traditional residential real estate mortgage loans. At September 30, 2017 and 2016 , respectively, approximately 22% and 27% of Home Today loans include private mortgage insurance coverage. The majority of the coverage on these loans was provided by PMI Mortgage Insurance Co., which the Arizona Department of Insurance seized in 2011 and indicated that all claims payments would be reduced by 50% . Between March 2013 and June 2016, PMIC gradually increased the cash percentage of the partial claim payment from 55% to 71.5% of the claim with the remainder deferred. Appropriate adjustments have been made to the Association’s affected valuation allowances and charge-offs, and estimated loss severity factors were adjusted accordingly for loans evaluated collectively. The amount of loans in the Association's total owned residential portfolio covered by mortgage insurance provided by PMIC as of September 30, 2017 and 2016 , respectively, was $61,470 and $91,784 of which $56,511 and $84,007 was current. The amount of loans in our owned portfolio covered by mortgage insurance provided by Mortgage Guaranty Insurance Corporation as of September 30, 2017 and 2016 , respectively, was $28,946 and $40,578 of which $28,870 and $40,190 was current. As of September 30, 2017 , MGIC's long-term debt rating, as published by the major credit rating agencies, did not meet the requirements to qualify as "high credit quality"; however, MGIC continues to make claims payments in accordance with its contractual obligations and the Association has not increased its estimated loss severity factors related to MGIC's claim paying ability. No other loans were covered by mortgage insurers that were deferring claim payments or which we assessed as being non-investment grade. Home equity loans and lines of credit, which are comprised primarily of home equity lines of credit, represent a significant portion of the residential real estate portfolio. Post-origination deterioration in economic and housing market conditions may impact a borrower's ability to afford the higher payments required during the end of draw repayment period that follows the period of interest only payments on home equity lines of credit originated prior to 2012 or the ability to secure alternative financing. Beginning in February 2013, the terms on new home equity lines of credit included monthly principal and interest payments throughout the entire term to minimize the potential payment differential between the during draw and after draw periods. The Association originates construction loans to individuals for the construction of their personal single-family residence by a qualified builder (construction/permanent loans). The Association’s construction/permanent loans generally provide for disbursements to the builder or sub-contractors during the construction phase as work progresses. During the construction phase, the borrower only pays interest on the drawn balance. Upon completion of construction, the loan converts to a permanent amortizing loan without the expense of a second closing. The Association offers construction/permanent loans with fixed or adjustable rates, and a current maximum loan-to-completed-appraised value ratio of 85%. Other consumer loans are comprised of loans secured by certificate of deposit accounts, which are fully recoverable in the event of non-payment. For all classes of loans, a loan is considered impaired when, based on current information and events, it is probable that the Association will be unable to collect the scheduled payments of principal and interest according to the contractual terms of the loan agreement. Factors considered in determining that a loan is impaired may include the deteriorating financial condition of the borrower indicated by missed or delinquent payments, a pending legal action, such as bankruptcy or foreclosure, or the absence of adequate security for the loan. The recorded investment and the unpaid principal balance of impaired loans, including those reported as TDRs, as of September 30, 2017 and 2016 are summarized as follows. Balances of recorded investments are adjusted for deferred loan fees and expenses. September 30, 2017 2016 Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance With no related IVA recorded: Residential Core $ 47,507 $ 65,132 $ — $ 53,560 $ 72,693 $ — Residential Home Today 18,780 41,064 — 20,108 44,914 — Home equity loans and lines of credit 18,793 25,991 — 20,549 30,216 — Total $ 85,080 $ 132,187 $ — $ 94,217 $ 147,823 $ — With an IVA recorded: Residential Core $ 47,240 $ 47,747 $ 7,336 $ 53,981 $ 54,717 $ 8,927 Residential Home Today 27,861 28,210 2,250 31,307 31,725 2,979 Home equity loans and lines of credit 20,379 20,389 1,475 15,345 15,357 722 Total $ 95,480 $ 96,346 $ 11,061 $ 100,633 $ 101,799 $ 12,628 Total impaired loans: Residential Core $ 94,747 $ 112,879 $ 7,336 $ 107,541 $ 127,410 $ 8,927 Residential Home Today 46,641 69,274 2,250 51,415 76,639 2,979 Home equity loans and lines of credit 39,172 46,380 1,475 35,894 45,573 722 Total $ 180,560 $ 228,533 $ 11,061 $ 194,850 $ 249,622 $ 12,628 At September 30, 2017 and 2016 , respectively, the recorded investment in impaired loans includes $162,020 and $170,602 of loans restructured in TDRs of which $11,884 and $12,368 are 90 days or more past due. The average recorded investment in impaired loans and the amount of interest income recognized during period that the loans were impaired are summarized below. For the Years Ended September 30, 2017 2016 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized With no related IVA recorded: Residential Core $ 50,534 $ 1,411 $ 57,869 $ 1,288 $ 67,509 $ 1,464 Residential Home Today 19,444 337 21,573 352 25,542 271 Home equity loans and lines of credit 19,671 293 21,798 282 24,832 299 Total $ 89,649 $ 2,041 $ 101,240 $ 1,922 $ 117,883 $ 2,034 With an IVA recorded: Residential Core $ 50,611 $ 1,891 $ 55,696 $ 2,228 $ 58,145 $ 2,570 Residential Home Today 29,584 1,445 33,158 1,756 37,070 1,877 Home equity loans and lines of credit 17,862 849 13,206 255 9,469 271 Construction — — 213 — 213 10 Total $ 98,057 $ 4,185 $ 102,273 $ 4,239 $ 104,897 $ 4,728 Total impaired loans: Residential Core $ 101,145 $ 3,302 $ 113,565 $ 3,516 $ 125,654 $ 4,034 Residential Home Today 49,028 1,782 54,731 2,108 62,612 2,148 Home equity loans and lines of credit 37,533 1,142 35,004 537 34,301 570 Construction — — 213 — 213 10 Total $ 187,706 $ 6,226 $ 203,513 $ 6,161 $ 222,780 $ 6,762 Interest on loans in non-accrual status is recognized on a cash-basis. The amount of interest income on impaired loans recognized using a cash-basis method is $1,443 , $1,400 and $1,347 for the years ended September 30, 2017 , 2016 and 2015 , respectively. Cash payments on loans with a partial charge-off are applied fully to principal, then to recovery of the charged off amount prior to interest income being recognized. Interest income on the remaining impaired loans is recognized on an accrual basis. Charge-offs on residential mortgage loans, home equity loans and lines of credit, and construction loans are recognized when triggering events, such as foreclosure actions, short sales, or deeds accepted in lieu of repayment, result in less than full repayment of the recorded investment in the loans. Partial or full charge-offs are also recognized for the amount of impairment on loans considered collateral dependent that meet the conditions described below. • For residential mortgage loans, payments are greater than 180 days delinquent; • For home equity lines of credit, equity loans, and residential loans restructured in a TDR, payments are greater than 90 days delinquent; • For all classes of loans, a sheriff sale is scheduled within 60 days to sell the collateral securing the loan; • For all classes of loans, all borrowers have been discharged of their obligation through a Chapter 7 bankruptcy; • For all classes of loans, within 60 days of notification, all borrowers obligated on the loan have filed Chapter 7 bankruptcy and have not reaffirmed or been dismissed; • For all classes of loans, a borrower obligated on a loan has filed bankruptcy and the loan is greater than 30 days delinquent; • For all classes of loans, it becomes evident that a loss is probable. Collateral dependent residential mortgage loans and construction loans are charged off to the extent the recorded investment in a loan, net of anticipated mortgage insurance claims, exceeds the fair value less costs to dispose of the underlying property. Management can determine the loan is uncollectible for reasons such as foreclosures exceeding a reasonable time frame and recommend a full charge-off. Home equity loans or lines of credit are charged off to the extent the recorded investment in the loan plus the balance of any senior liens exceeds the fair value less costs to dispose of the underlying property or management determines the collateral is not sufficient to satisfy the loan. A loan in any portfolio that is identified as collateral dependent will continue to be reported as impaired until it is no longer considered collateral dependent, is less than 30 days past due and does not have a prior charge-off. A loan in any portfolio that has a partial charge-off consequent to impairment evaluation will continue to be individually evaluated for impairment until, at a minimum, the impairment has been recovered. The following summarizes the effective dates of charge-off policies that changed or were first implemented during the current and previous four fiscal years and the portfolios to which those policies apply. Effective Date Policy Portfolio(s) Affected 6/30/2014 A loan is considered collateral dependent and any collateral shortfall is charged off when, within 60 days of notification, all borrowers obligated on a loan filed Chapter 7 bankruptcy and have not reaffirmed or been dismissed (1) All (1) Prior to 6/30/2014, collateral shortfalls on loans in Chapter 7 bankruptcy were charged off when all borrowers were discharged of the obligation or when the loan was 30 days or more past due. Adoption of this policy did not result in a material change to total charge-offs or the provision for loan losses in the fiscal year ending September 30, 2014. Loans restructured in TDRs that are not evaluated based on collateral are separately evaluated for impairment on a loan by loan basis at the time of restructuring and at each subsequent reporting date for as long as they are reported as TDRs. The impairment evaluation is based on the present value of expected future cash flows discounted at the effective interest rate of the original loan. Expected future cash flows include a discount factor representing a potential for default. Valuation allowances are recorded for the excess of the recorded investments over the result of the cash flow analysis. Loans discharged in Chapter 7 bankruptcy are reported as TDRs and also evaluated based on the present value of expected future cash flows unless evaluated based on collateral. We evaluate these loans using the expected future cash flows because we expect the borrower, not liquidation of the collateral, to be the source of repayment for the loan. Other consumer loans are not considered for restructuring. A loan restructured in a TDR is classified as an impaired loan for a minimum of one year. After one year, that loan may be reclassified out of the balance of impaired loans if the loan was restructured to yield a market rate for loans of similar credit risk at the time of restructuring and the loan is not impaired based on the terms of the restructuring agreement. No loans whose terms were restructured in TDRs were reclassified from impaired loans during the years ended September 30, 2017 , 2016 and 2015 . The recorded investment in TDRs by type of concession as of September 30, 2017 and September 30, 2016 is shown in the tables below. September 30, 2017 Reduction Payment Forbearance Multiple Concessions Multiple Restructurings Bankruptcy Total Residential Core $ 12,485 $ 521 $ 8,176 $ 21,278 $ 20,459 $ 23,670 $ 86,589 Residential Home Today 5,441 — 4,811 10,538 18,877 4,337 44,004 Home equity loans and lines of credit 106 6,033 373 14,661 1,471 8,783 31,427 Total $ 18,032 $ 6,554 $ 13,360 $ 46,477 $ 40,807 $ 36,790 $ 162,020 September 30, 2016 Reduction Payment Forbearance Multiple Concessions Multiple Bankruptcy Total Residential Core $ 13,456 $ 748 $ 8,595 $ 22,641 $ 21,517 $ 28,263 $ 95,220 Residential Home Today 6,338 — 5,198 11,330 20,497 5,241 48,604 Home equity loans and lines of credit 120 4,135 401 9,354 1,166 11,602 26,778 Total $ 19,914 $ 4,883 $ 14,194 $ 43,325 $ 43,180 $ 45,106 $ 170,602 TDRs may be restructured more than once. Among other requirements, a subsequent restructuring may be available for a borrower upon the expiration of temporary restructured terms if the borrower cannot return to regular loan payments. If the borrower is experiencing an income curtailment that temporarily has reduced his/her capacity to repay, such as loss of employment, reduction of hours, non-paid leave or short term disability, a temporary restructuring is considered. If the borrower lacks the capacity to repay the loan at the current terms due to a permanent condition, a permanent restructuring is considered. In evaluating the need for a subsequent restructuring, the borrower’s ability to repay is generally assessed utilizing a debt to income and cash flow analysis. As the economy has improved, the need for multiple restructurings has begun to abate. Loans discharged in Chapter 7 bankruptcy are classified as multiple restructurings if the loan's original terms had also been restructured by the Association. For all loans restructured during the years ended September 30, 2017 , 2016 and 2015 (set forth in the tables below), the pre-restructured outstanding recorded investment was not materially different from the post-restructured outstanding recorded investment. The following tables set forth the recorded investment in TDRs restructured during the years presented, according to the types of concessions granted. For the Year Ended September 30, 2017 Reduction Payment Extensions Forbearance Multiple Concessions Multiple Bankruptcy Total (Dollars in thousands) Residential Core $ 818 $ — $ 1,340 $ 1,654 $ 2,176 $ 2,621 $ 8,609 Residential Home Today 147 — 456 458 2,734 469 4,264 Home equity loans and lines of credit — 2,282 32 6,834 694 1,042 10,884 Total $ 965 $ 2,282 $ 1,828 $ 8,946 $ 5,604 $ 4,132 $ 23,757 For the Year Ended September 30, 2016 Reduction Payment Extensions Forbearance Multiple Concessions Multiple Bankruptcy Total (Dollars in thousands) Residential Core $ 1,342 $ — $ 1,154 $ 4,444 $ 2,902 $ 4,929 $ 14,771 Residential Home Today 169 — 489 542 3,487 469 5,156 Home equity loans and lines of credit 58 1,371 33 5,842 459 1,360 9,123 Total $ 1,569 $ 1,371 $ 1,676 $ 10,828 $ 6,848 $ 6,758 $ 29,050 For the Year Ended September 30, 2015 Reduction in Interest Rates Payment Extensions Forbearance or Other Actions Multiple Concessions Multiple Bankruptcy Total (Dollars in thousands) Residential Core $ 2,490 $ — $ 745 $ 4,464 $ 4,437 $ 6,720 $ 18,856 Residential Home Today 80 — 758 301 5,306 2,096 8,541 Home equity loans and lines of credit — 1,800 88 3,079 290 1,634 6,891 Total $ 2,570 $ 1,800 $ 1,591 $ 7,844 $ 10,033 $ 10,450 $ 34,288 Below summarizes the information on TDRs restructured within the previous 12 months of the period presented for which there was a subsequent payment default, at least 30 days past due on one scheduled payment, during the period presented. For the Year Ended September 30, 2017 For the Year Ended September 30, 2016 For the Year Ended September 30, 2015 TDRs That Subsequently Defaulted Number of Contracts Recorded Investment Number of Contracts Recorded Investment Number of Recorded (Dollars in thousands) (Dollars in thousands) (Dollars in thousands) Residential Core 17 $ 1,462 32 $ 2,282 34 $ 3,296 Residential Home Today 25 1,126 26 1,088 26 1,179 Home equity loans and lines of credit 16 667 28 886 44 689 Total 58 $ 3,255 86 $ 4,256 104 $ 5,164 Residential loans are internally assigned a grade that complies with the guidelines outlined in the OCC’s Handbook for Rating Credit Risk. Pass loans are assets well protected by the current paying capacity of the borrower. Special Mention loans have a potential weakness, as evaluated based on delinquency status, that the Association feels deserve management’s attention and may result in further deterioration in their repayment prospects and/or the Association’s credit position. Substandard loans are inadequately protected by the current payment capacity of the borrower or the collateral pledged with a defined weakness that jeopardizes the liquidation of the debt. Also included in Substandard are performing home equity loans and lines of credit where the customer has a severely delinquent first mortgage to which the performing home equity loan or line of credit is subordinate and loans in Chapter 7 bankruptcy status where all borrowers have filed, and have not reaffirmed or been dismissed. Loss loans are considered uncollectible and are charged off when identified. The following tables provide information about the credit quality of residential loan receivables by an internally assigned grade. Balances are adjusted for deferred loan fees, expenses and any applicable LIP. Pass Special Mention Substandard Loss Total September 30, 2017 Real Estate Loans: Residential Core $ 10,709,739 $ — $ 51,304 $ — $ 10,761,043 Residential Home Today 88,247 — 19,436 — 107,683 Home equity loans and lines of credit 1,545,658 3,837 20,556 — 1,570,051 Construction 26,427 — — — 26,427 Total real estate loans $ 12,370,071 $ 3,837 $ 91,296 $ — $ 12,465,204 Pass Special Mention Substandard Loss Total September 30, 2016 Real Estate Loans: Residential Core $ 10,022,555 $ — $ 57,059 $ — $ 10,079,614 Residential Home Today 99,442 — 20,993 — 120,435 Home equity loans and lines of credit 1,516,551 4,122 21,917 — 1,542,590 Construction 24,844 — — — 24,844 Total real estate loans $ 11,663,392 $ 4,122 $ 99,969 $ — $ 11,767,483 At September 30, 2017 and 2016 , respectively, the recorded investment of impaired loans includes $94,104 and $101,227 of TDRs that are individually evaluated for impairment, but have adequately performed under the terms of the restructuring and are classified as Pass loans. At September 30, 2017 and 2016 , respectively, there were $4,840 and $6,346 of loans classified substandard and $3,837 and $4,122 of loans designated special mention that are not included in the recorded investment of impaired loans; rather, they are included in loans collectively evaluated for impairment. Other consumer loans are internally assigned a grade of nonperforming when they are considered 90 days or more past due. At September 30, 2017 and September 30, 2016 , no consumer loans were graded as nonperforming. During the years ended September 30, 2017 and 2016, respectively, $0 and $244 in recoveries were recorded representing payments received as a result of PMIC increasing the cash percentage of the partial claim payment plan as discussed earlier in this note. Activity in the allowance for loan losses is summarized as follows: For the Year Ended September 30, 2017 Beginning Balance Provisions Charge-offs Recoveries Ending Balance Real estate loans: Residential Core $ 15,068 $ (3,311 ) $ (3,029 ) $ 5,458 $ 14,186 Residential Home Today 7,416 (1,943 ) (2,276 ) 1,311 4,508 Home equity loans and lines of credit 39,304 (11,744 ) (6,173 ) 8,862 30,249 Construction 7 (2 ) — — 5 Total real estate loans $ 61,795 $ (17,000 ) $ (11,478 ) $ 15,631 $ 48,948 For the Year Ended September 30, 2016 Beginning Balance Provisions Charge-offs Recoveries Ending Balance Real estate loans: Residential Core $ 22,596 $ (6,942 ) $ (4,294 ) $ 3,708 $ 15,068 Residential Home Today 9,997 (1,253 ) (2,761 ) 1,433 7,416 Home equity loans and lines of credit 38,926 255 (7,846 ) 7,969 39,304 Construction 35 (60 ) — 32 7 Total real estate loans $ 71,554 $ (8,000 ) $ (14,901 ) $ 13,142 $ 61,795 For the Year Ended September 30, 2015 Beginning Balance Provisions Charge-offs Recoveries Ending Balance Real estate loans: Residential Core $ 31,080 $ (6,987 ) $ (6,866 ) $ 5,369 $ 22,596 Residential Home Today 16,424 (4,508 ) (3,452 ) 1,533 9,997 Home equity loans and lines of credit 33,831 8,661 (11,034 ) 7,468 38,926 Construction 27 (166 ) — 174 35 Total real estate loans $ 81,362 $ (3,000 ) $ (21,352 ) $ 14,544 $ 71,554 |