Loans Receivable | Loans Receivable Loans receivable are summarized as follows at the dates indicated: September 30, 2015 December 31, 2014 (In thousands) One-to-four family residential: Permanent owner occupied $ 148,742 $ 161,013 Permanent non-owner occupied 106,794 112,180 Construction non-owner occupied (1) — 500 255,536 273,693 Multifamily: Permanent 113,441 116,014 Construction (1) 21,115 4,450 134,556 120,464 Commercial real estate: Permanent 245,559 239,211 Construction (1) — 6,100 Land (2) 8,128 2,956 253,687 248,267 Construction/land development: One-to-four family residential (1) 30,581 19,860 Multifamily (1) 27,596 17,902 Commercial (1) 4,300 4,300 Land development (2) 6,403 8,993 68,880 51,055 Business 6,973 3,783 Consumer 6,655 7,130 Total loans 726,287 704,392 Less: Loans in process ("LIP") 38,611 27,359 Deferred loan fees, net 2,710 2,604 Allowance for loan and lease losses ("ALLL") 10,146 10,491 Loans receivable, net $ 674,820 $ 663,938 ___________ (1) Construction/land development excludes construction loans that will convert to permanent loans. The Company considers these loans to be "rollovers" in that one loan is originated for both the construction loan and permanent financing. These loans are classified according to the underlying collateral. At September 30, 2015 , the Company had no one-to-four family residential or commercial real estate loans, and $21.1 million or 15.7% of its total multifamily portfolio in these rollover loans. At December 31, 2014, the Company had $6.1 million or 2.5% of the total commercial real estate portfolio and $4.5 million or 3.7% of the total multifamily portfolio, and $500,000 or 0.2% of the total one-to-four family residential portfolio in these rollover loans. (2) At September 30, 2015 , and December 31, 2014, $8.1 million and $3.0 million , respectively, of commercial real estate loans were not included in the construction/land development category because the Company classifies raw land or buildable lots (where we do not intend to finance the construction) as commercial real estate land loans. At both September 30, 2015 and December 31, 2014 , there were no loans classified as held for sale. ALLL . The Company maintains an ALLL as a reserve against probable and inherent risk of losses in its loan portfolios. The ALLL is comprised of a general reserve component for loans evaluated collectively for loss and a specific reserve component for loans evaluated individually. We continually monitor our loan portfolio for delinquent loans and changes in our borrower's financial condition. When an issue is identified and it is determined that the loan needs to be classified as nonperforming and/or impaired, an evaluation of the collateral is performed and, if necessary, an appraisal is ordered in accordance with our appraisal policy guidelines. Based on this evaluation, any additional provision for loan loss or charge-offs is recorded prior to the end of the financial reporting period. The following tables summarize changes in the ALLL and loan portfolio by loan type and impairment method at the dates and for the periods shown: At or For the Three Months Ended September 30, 2015 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) ALLL: Beginning balance $ 3,536 $ 1,187 $ 4,436 $ 819 $ 189 $ 436 $ 10,603 Charge-offs (2 ) — — — — (20 ) (22 ) Recoveries 217 — 48 — — — 265 Provision (recapture) (245 ) 15 (579 ) 76 21 12 (700 ) Ending balance $ 3,506 $ 1,202 $ 3,905 $ 895 $ 210 $ 428 $ 10,146 At or For the Nine Months Ended September 30, 2015 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) ALLL: Beginning balance $ 3,694 $ 1,646 $ 4,597 $ 355 $ 47 $ 152 $ 10,491 Charge-offs (27 ) (281 ) — — — (54 ) (362 ) Recoveries 908 — 105 — 3 301 1,317 Provision (recapture) (1,069 ) (163 ) (797 ) 540 160 29 (1,300 ) Ending balance $ 3,506 $ 1,202 $ 3,905 $ 895 $ 210 $ 428 $ 10,146 ALLL by category: General reserve $ 2,945 $ 1,199 $ 3,665 $ 895 $ 210 $ 388 $ 9,302 Specific reserve 561 3 240 — — 40 844 Loans: (1) Total loans $ 255,536 $ 123,752 $ 253,687 $ 41,073 $ 6,973 $ 6,655 $ 687,676 Loans with general (2) 217,660 120,467 245,947 41,073 6,973 6,444 638,564 Loans with specific (3) 37,876 3,285 7,740 — — 211 49,112 ____________ (1) Net of LIP. (2) Loans collectively evaluated for general reserves. (3) Loans individually evaluated for specific reserves. At or For the Three Months Ended September 30, 2014 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) ALLL: Beginning balance $ 4,377 $ 1,433 $ 5,622 $ 333 $ 11 $ 175 $ 11,951 Charge-offs (3 ) — — — — (6 ) (9 ) Recoveries 12 — — — 5 1 18 Provision (recapture) (379 ) (64 ) 97 49 10 (13 ) (300 ) Ending balance $ 4,007 $ 1,369 $ 5,719 $ 382 $ 26 $ 157 $ 11,660 At or For the Nine Months Ended September 30, 2014 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (In thousands) ALLL: Beginning balance $ 5,141 $ 1,377 $ 5,881 $ 399 $ 14 $ 182 $ 12,994 Charge-offs (78 ) — (311 ) (223 ) — (30 ) (642 ) Recoveries 46 — 151 — 6 5 208 Provision (recapture) (1,102 ) (8 ) (2 ) 206 6 — (900 ) Ending balance $ 4,007 $ 1,369 $ 5,719 $ 382 $ 26 $ 157 $ 11,660 ALLL by category: General reserve $ 2,896 $ 1,340 $ 5,240 $ 382 $ 26 $ 157 $ 10,041 Specific reserve 1,111 29 479 — — — 1,619 Loans: (1) Total loans 279,360 123,599 260,198 25,736 2,148 7,543 698,584 Loans with general (2) 234,094 121,417 250,392 25,736 2,148 7,423 641,210 Loans with specific (3) 45,266 2,182 9,806 — — 120 57,374 _____________ (1) Net of LIP. (2) Loans collectively evaluated for general reserves. (3) Loans individually evaluated for specific reserves. Past Due Loans. Loans are considered past due if a scheduled principal or interest payment is due and unpaid for 30 days or more. At September 30, 2015 , total past due loans comprised 0.51% of total loans receivable, net of LIP, as compared to 0.66% at December 31, 2014. The following tables represent a summary of the aging of loans by type at the dates indicated: Loans Past Due as of September 30, 2015 30-59 Days 60-89 Days 90 Days and Total Past Current Total (1) (2) (In thousands) Real estate: One-to-four family residential: Owner occupied $ 898 $ 333 $ 172 $ 1,403 $ 147,339 $ 148,742 Non-owner occupied — — — — 106,794 106,794 Multifamily — — 1,683 1,683 122,069 123,752 Commercial real estate 320 — — 320 253,367 253,687 Construction/land development — — — — 41,073 41,073 Total real estate 1,218 333 1,855 3,406 670,642 674,048 Business — — — — 6,973 6,973 Consumer — 72 — 72 6,583 6,655 Total loans $ 1,218 $ 405 $ 1,855 $ 3,478 $ 684,198 $ 687,676 ________________ (1) There were no loans 90 days and greater past due and still accruing interest at September 30, 2015 . (2) Net of LIP. Loans Past Due as of December 31, 2014 30-59 Days 60-89 Days 90 Days and Total Past Current Total (1) (2) (In thousands) Real estate: One-to-four family residential: Owner occupied $ 666 $ 575 $ 666 $ 1,907 $ 159,106 $ 161,013 Non-owner occupied — — 164 164 112,388 112,552 Multifamily 1,965 — — 1,965 118,306 120,271 Commercial real estate — 325 11 336 247,632 247,968 Construction/land development — — — — 24,316 24,316 Total real estate 2,631 900 841 4,372 661,748 666,120 Business — — — — 3,783 3,783 Consumer — 75 — 75 7,055 7,130 Total loans $ 2,631 $ 975 $ 841 $ 4,447 $ 672,586 $ 677,033 _________________ (1) There were no loans 90 days and greater past due and still accruing interest at December 31, 2014. (2) Net of LIP. Nonaccrual Loans. Loans are placed on nonaccrual when they are 90 days delinquent or when, in management's opinion, the borrower is unable to meet scheduled payment obligations. In order to return a nonaccrual loan to accrual status, the Company evaluates the borrower's financial condition to ensure that future loan payments are reasonably assured. The Company also takes into consideration the borrower's willingness and ability to make the loan payments, as well as historical repayment performance. The Company requires the borrower to make loan payments consistently for a period of at least six months as agreed to under the terms of the loan agreement before the Company will consider reclassifying the loan to accrual status. The following table is a summary of nonaccrual loans by loan type at the dates indicated: September 30, 2015 December 31, 2014 (In thousands) One-to-four family residential $ 655 $ 830 Multifamily 1,683 — Commercial real estate — 434 Consumer 91 75 Total nonaccrual loans $ 2,429 $ 1,339 During the three and nine months ended September 30, 2015, interest income that would have been recognized had these nonaccrual loans been performing in accordance with their original terms was $31,000 and $87,000 , respectively. For the three and nine months ended September 30, 2014, lost interest on nonaccrual loans was $26,000 and $105,000 , respectively. The following tables summarize the loan portfolio by type and payment status at the dates indicated: September 30, 2015 One-to-Four Multifamily Commercial Construction / Business Consumer Total (1) (In thousands) Performing (2) $ 254,881 $ 122,069 $ 253,687 $ 41,073 $ 6,973 $ 6,564 $ 685,247 Nonperforming (3) 655 1,683 — — — 91 2,429 Total loans $ 255,536 $ 123,752 $ 253,687 $ 41,073 $ 6,973 $ 6,655 $ 687,676 _____________ (1) Net of LIP. (2) There were $148.2 million of owner-occupied one-to-four family residential loans and $106.7 million of non-owner occupied one-to-four family residential loans classified as performing. (3) There were $581,000 of owner-occupied one-to-four family residential loans and $74,000 non-owner occupied one-to-four family residential loans classified as nonperforming. December 31, 2014 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (1) (In thousands) Performing (2) $ 272,735 $ 120,271 $ 247,534 $ 24,316 $ 3,783 $ 7,055 $ 675,694 Nonperforming (3) 830 — 434 — — 75 1,339 Total loans $ 273,565 $ 120,271 $ 247,968 $ 24,316 $ 3,783 $ 7,130 $ 677,033 _____________ (1) Net of LIP. (2) There were $160.3 million of owner-occupied one-to-four family residential loans and $112.4 million of non-owner occupied one-to-four family residential loans classified as performing. (3) There were $666,000 of owner-occupied one-to-four family residential loans and $164,000 of non-owner occupied one-to-four family residential loans classified as nonperforming. Impaired Loans. A loan is considered impaired when we have determined that we may be unable to collect payments of principal or interest when due under the terms of the original loan document. When identifying loans as impaired, management takes into consideration factors which include payment history and status, collateral value, financial condition of the borrower, and the probability of collecting scheduled payments in the future. Minor payment delays and insignificant payment shortfalls typically do not result in a loan being classified as impaired. The significance of payment delays and shortfalls is considered by management on a case-by-case basis after taking into consideration the circumstances surrounding the loan and the borrower, including payment history and the amounts of any payment shortfall, length and reason for delay and the likelihood of a return to stable performance. Impairment is measured on a loan-by-loan basis for all loans in the portfolio. We obtain annual updated appraisals for impaired collateral dependent loans that exceed $1.0 million. There were no funds committed to be advanced in connection with impaired loans at either September 30, 2015 , or December 31, 2014. The following tables present a summary of loans individually evaluated for impairment by loan type at the dates indicated: September 30, 2015 Recorded Investment (1) Unpaid Principal Balance (2) Related Allowance (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 3,270 $ 3,512 $ — Non-owner occupied 24,621 24,646 — Multifamily 2,100 2,381 — Commercial real estate 5,013 5,264 — Consumer 134 172 — Total 35,138 35,975 — Loans with an allowance: One-to-four family residential: Owner occupied 2,127 2,197 96 Non-owner occupied 7,858 7,910 465 Multifamily 1,185 1,185 3 Commercial real estate 2,727 2,727 240 Consumer 77 77 40 Total 13,974 14,096 844 Total impaired loans: One-to-four family residential: Owner occupied 5,397 5,709 96 Non-owner occupied 32,479 32,556 465 Multifamily 3,285 3,566 3 Commercial real estate 7,740 7,991 240 Consumer 211 249 40 Total $ 49,112 $ 50,071 $ 844 _________________ (1) Represents the loan balance less charge-offs. (2) Contractual loan principal balance. December 31, 2014 Recorded Investment (1) Unpaid Principal Balance (2) Related Allowance (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 3,308 $ 3,661 $ — Non-owner occupied 29,224 29,266 — Commercial real estate 4,553 4,851 — Consumer 118 153 — Total 37,203 37,931 — Loans with an allowance: One-to-four family residential: Owner occupied 2,554 2,624 121 Non-owner occupied 8,652 8,704 679 Multifamily 2,172 2,172 27 Commercial real estate 4,999 4,999 329 Consumer 79 79 59 Total 18,456 18,578 1,215 Total impaired loans: One-to-four family residential: Owner occupied 5,862 6,285 121 Non-owner occupied 37,876 37,970 679 Multifamily 2,172 2,172 27 Commercial real estate 9,552 9,850 329 Consumer 197 232 59 Total $ 55,659 $ 56,509 $ 1,215 _________________ (1) Represents the loan balance less charge-offs. (2) Contractual loan principal balance. The following tables present the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the three and nine months ended September 30, 2015 and 2014: Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 3,114 $ 49 $ 3,215 $ 131 Non-owner occupied 25,142 361 26,835 1,123 Multifamily 2,101 8 1,471 23 Commercial real estate 4,757 85 4,650 269 Consumer 125 2 121 3 Total 35,239 505 36,292 1,549 Loans with an allowance: One-to-four family residential: Owner occupied 2,131 12 2,240 89 Non-owner occupied 7,772 115 8,084 345 Multifamily 1,187 19 1,677 58 Commercial real estate 3,199 41 3,883 104 Consumer 77 — 78 2 Total 14,366 187 15,962 598 Total impaired loans: One-to-four family residential: Owner occupied 5,245 61 5,455 220 Non-owner occupied 32,914 476 34,919 1,468 Multifamily 3,288 27 3,148 81 Commercial real estate 7,956 126 8,533 373 Consumer 202 2 199 5 Total $ 49,605 $ 692 $ 52,254 $ 2,147 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (In thousands) Loans with no related allowance: One-to-four family residential: Owner occupied $ 3,256 $ 45 $ 3,444 $ 115 Non-owner occupied 28,984 438 28,995 1,312 Multifamily 111 — 171 — Commercial real estate 2,812 41 4,388 123 Construction/land development — — 56 — Consumer 82 2 63 3 Total 35,245 526 37,117 1,553 Loans with an allowance: One-to-four family residential: Owner occupied 2,974 29 3,134 94 Non-owner occupied 10,792 147 11,307 447 Multifamily 2,187 36 2,196 107 Commercial real estate 7,032 101 7,054 282 Total 22,985 313 23,691 930 Total impaired loans: One-to-four family residential: Owner occupied 6,230 74 6,578 209 Non-owner occupied 39,776 585 40,302 1,759 Multifamily 2,298 36 2,367 107 Commercial real estate 9,844 142 11,442 405 Construction/land development — — 56 — Consumer 82 2 63 3 Total $ 58,230 $ 839 $ 60,808 $ 2,483 Troubled Debt Restructurings. Certain loan modifications are accounted for as troubled debt restructured loans ("TDRs"). In general, the modification or restructuring of a debt is considered a TDR if, for economic or legal reasons related to the borrower's financial difficulties, a concession is granted to the borrower that the Company would not otherwise consider. Once the loan is restructured, a current, well-documented credit evaluation of the borrower's financial condition and prospects for repayment are performed to assess the likelihood that all principal and interest payments required under the terms of the modified agreement will be collected in full. A loan that is classified as a TDR is generally reported as a TDR until the loan is paid in full or otherwise settled, sold, or charged-off. The accrual status of a loan may change after it has been classified as a TDR. Management considers the following in determining the accrual status of restructured loans: (1) if the loan was on accrual status prior to the restructuring, the borrower has demonstrated performance under the previous terms, and a credit evaluation shows the borrower's capacity to continue to perform under the restructured terms (both principal and interest payments), the loan will remain on accrual at the time of the restructuring; (2) if the loan was on nonaccrual status before the restructuring, and the Company's credit evaluation shows the borrower's capacity to meet the restructured terms, the loan would remain as nonaccrual for a minimum of six months after restructuring until the borrower has demonstrated a reasonable period of sustained repayment performance, thereby providing reasonable assurance as to the ultimate collection of principal and interest in full under the modified terms. At September 30, 2015 and December 31, 2014, the TDR portfolio totaled $46.6 million and $54.2 million , respectively, all of which were on accrual status and performing in accordance with the terms of their restructure. The following tables present loans that were modified as TDRs within the periods indicated, and their recorded investment both prior to and after the modification: Three Months Ended September 30, 2015 Nine Months Ended September 30, 2015 Number of Loans Pre-Modification Outstanding Post-Modification Outstanding Number of Loans Pre-Modification Outstanding Post-Modification Outstanding (Dollars in thousands) One-to-four family Interest-only payments with interest rate concession and advancement of maturity date — — — 6 1,439 1,439 Principal and interest with interest rate concession and advancement of maturity date 2 426 426 2 426 426 Advancement of maturity date — — — 2 248 248 Commercial real estate: Principal and interest with interest rate concession and advancement of maturity date 1 775 775 1 775 775 Advancement of maturity date — — — 2 866 866 Interest-only payments with interest rate concession and advancement of maturity date — — — 1 496 496 Interest-only payments with advancement of maturity date — — — 1 2,004 2,004 Total 3 $ 1,201 $ 1,201 15 $ 6,254 $ 6,254 Three Months Ended September 30, 2014 Nine Months Ended September 30, 2014 Number of Loans Pre-Modification Outstanding Post-Modification Outstanding Number of Loans Pre-Modification Outstanding Post-Modification Outstanding (Dollars in thousands) One-to-four family Interest-only payments with interest rate concession 6 $ 1,439 $ 1,439 6 $ 1,439 $ 1,439 Principal and interest with interest rate concession 5 $ 953 $ 953 6 $ 1,174 $ 1,174 Advancement of maturity date — — — 4 772 772 Commercial real estate: Interest-only payments with interest rate concession 1 1,466 1,466 2 3,470 3,470 Total 12 $ 3,858 $ 3,858 18 $ 6,855 $ 6,855 At September 30, 2015 , the Company had no commitments to extend additional credit to borrowers whose loan terms have been modified in TDRs. All TDRs are also classified as impaired loans and are included in the loans individually evaluated for impairment in the calculation of the ALLL. The TDRs that occurred during the three and nine months ended September 30, 2015 and 2014, were the result of advancing the maturity date for balloon payments on loans otherwise current on principal and interest payments, or granting the borrower interest rate concessions and/or interest-only payments and advancing the maturity date for a period of time ranging from one to three years. The impaired portion of the loan with an interest rate concession and/or interest-only payments for a specific period of time are calculated based on the present value of expected future cash flows discounted at the loan’s effective interest rate. The effective interest rate is the rate of return implicit on the original loan. This impaired amount increases the ALLL and is expensed to earnings. As loan payments are received in future periods, the impairment is amortized over the life of the concession, reducing ALLL and recapturing provision expense. TDRs resulted in no charge-offs to the ALLL for the three and nine months ended September 30, 2015 and 2014. TDRs that default after they have been modified are typically evaluated individually on a collateral basis. Any additional impairment is charged to the ALLL. For the three and nine months ended September 30, 2015, one loan of $226,000 that had been modified with an advancement of maturity date during the previous 12 months missed one payment but subsequently became current. During the three months ended September 30, 2014, no loans defaulted that had been modified as TDRs within the previous 12 months. For the nine months ended September 30, 2014, one loan of $430,000 that was restructured with an advancement of maturity date during the previous 12 months missed a payment, but became current the subsequent quarter. Credit Quality Indicators . The Company utilizes a nine-category risk rating system and assigns a risk rating for all credit exposures. The risk rating system is designed to define the basic characteristics and identify risk elements of each credit extension. Credits risk rated 1 through 5 are considered to be “pass” credits. Pass credits include assets, such as cash secured loans with funds on deposit with the Bank, where there is virtually no credit risk. Pass credits also include credits that are on the Company's watch list, where the borrower exhibits potential weaknesses, which may, if not checked or corrected, negatively affect the borrower’s financial capacity and threaten their ability to fulfill debt obligations in the future. Credits classified as special mention are risk rated 6 and possess weaknesses that deserve management’s close attention. Special mention assets do not expose the Company to sufficient risk to warrant adverse classification in the substandard, doubtful or loss categories. Substandard credits are risk rated 7 . An asset is considered substandard if it is inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged. Substandard assets include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful are risk rated 8 and have all the weaknesses inherent in those credits classified as substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values. Assets classified as loss are risk rated 9 and are considered uncollectible and cannot be justified as a viable asset for the Company. There were no loans classified as doubtful or loss at September 30, 2015 and December 31, 2014. The following tables represent a summary of loans by type and risk category at the dates indicated: September 30, 2015 One-to-Four Multifamily Commercial Construction/ Business Consumer Total (1) (In thousands) Risk Rating: Pass $ 246,981 $ 120,671 $ 247,041 $ 41,073 $ 6,973 $ 6,376 $ 669,115 Special mention 5,854 1,398 5,831 — — 188 13,271 Substandard 2,701 1,683 815 — — 91 5,290 Total loans $ 255,536 $ 123,752 $ 253,687 $ 41,073 $ 6,973 $ 6,655 $ 687,676 _____________ (1) Net of LIP. December 31, 2014 One-to-Four Family Residential Multifamily Commercial Real Estate Construction / Land Development Business Consumer Total (1) (In thousands) Risk Rating: Pass $ 263,094 $ 116,891 $ 235,841 $ 24,316 $ 3,783 $ 6,833 $ 650,758 Special mention 4,157 1,416 10,529 — — — 16,102 Substandard 6,314 1,964 1,598 — — 297 10,173 Total loans $ 273,565 $ 120,271 $ 247,968 $ 24,316 $ 3,783 $ 7,130 $ 677,033 _____________ (1) Net of LIP. |