| Loans Receivable And Allowance For Credit Losses | 4. LOANS RECEIVABLE and ALLOWANCE FOR CREDIT LOSSES Loans receivable, net at the dates presented is summarized as follows: December 31, 2015 September 30, 2015 (Dollars in thousands) Real estate loans: One- to four-family $ 6,371,418 $ 6,342,412 Multi-family and commercial 113,852 110,938 Construction 137,501 129,920 Total real estate loans 6,622,771 6,583,270 Consumer loans: Home equity 126,259 125,844 Other 4,219 4,179 Total consumer loans 130,478 130,023 Total loans receivable 6,753,249 6,713,293 Less: Undisbursed loan funds 91,601 90,565 ACL 9,201 9,443 Discounts/unearned loan fees 24,172 24,213 Premiums/deferred costs (36,853 ) (35,955 ) $ 6,665,128 $ 6,625,027 Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business, resulting in a loan concentration in residential first mortgage loans. The Bank purchases one- to four-family loans, on a loan-by-loan basis, from a select group of correspondent lenders. The Bank also originates consumer loans, commercial and multi-family real estate loans, and construction loans secured by residential, multi-family or commercial real estate and participates in commercial and multi-family real estate and construction loans. As a result of our one- to four-family lending activities, the Bank has a concentration of loans secured by real property located in Kansas and Missouri. One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans. Loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB"). Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and approved by our Board of Directors. The underwriting standards for loans purchased from correspondent and nationwide lenders are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters. For the tables within this Note, correspondent loans purchased on a loan-by-loan basis are included with originated loans and loans purchased in loan packages ("bulk loans") are reported as purchased loans. The Bank also originates construction-to-permanent loans secured by one- to four-family residential real estate. Construction loans are obtained by homeowners who will occupy the property when construction is complete. Construction loans to builders for speculative purposes are not permitted. All construction loans are manually underwritten using the Bank's internal underwriting standards. Construction draw requests and the supporting documentation are reviewed and approved by management. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided. Multi-family and commercial loans - The Bank's multi-family, commercial real estate, and related construction loans are originated by the Bank or are in participation with a lead bank. These loans are granted based on the income producing potential of the property and the financial strength of the borrower and/or guarantor. At the time of origination, loan-to-value ("LTV") ratios on multi-family, commercial real estate, and related construction loans generally cannot exceed 80% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.25 . The Bank generally requires personal guarantees from the borrowers or the individuals that own the borrowing entity, which cover the entire outstanding debt, in addition to the security property as collateral for these loans. Appraisals on properties securing these loans are performed by independent state certified fee appraisers. Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, auto loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. The Bank does not originate any consumer loans on an indirect basis, such as contracts purchased from retailers of goods or services which have extended credit to their customers. The majority of the consumer loan portfolio is comprised of home equity lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position. The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of an applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount. Credit Quality Indicators - Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: (1) one- to four-family loans; (2) consumer loans; and (3) multi-family and commercial loans. The one- to four-family and consumer segments are further segmented into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family loans - originated, one- to four-family loans - purchased, consumer loans - home equity, and consumer loans - other. The Bank's primary credit quality indicators for the one- to four-family loan and consumer - home equity loan portfolios are delinquency status, asset classifications, LTV ratios, and borrower credit scores. The Bank's primary credit quality indicators for the multi-family and commercial loan and consumer - other loan portfolios are delinquency status and asset classifications. The following tables present the recorded investment, by class, in loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total recorded investment at the dates presented. The recorded investment in loans is defined as the unpaid principal balance of a loan (net of unadvanced funds related to loans in process), less charge-offs and inclusive of unearned loan fees and deferred costs. At December 31, 2015 and September 30, 2015, all loans 90 or more days delinquent were on nonaccrual status. December 31, 2015 90 or More Days Total Total 30 to 89 Days Delinquent or Delinquent Current Recorded Delinquent in Foreclosure Loans Loans Investment (Dollars in thousands) One- to four-family loans - originated $ 17,304 $ 9,864 $ 27,168 $ 5,916,786 $ 5,943,954 One- to four-family loans - purchased 7,859 7,251 15,110 456,862 471,972 Multi-family and commercial loans — — — 127,925 127,925 Consumer - home equity 730 574 1,304 124,955 126,259 Consumer - other 88 25 113 4,106 4,219 $ 25,981 $ 17,714 $ 43,695 $ 6,630,634 $ 6,674,329 September 30, 2015 90 or More Days Total Total 30 to 89 Days Delinquent or Delinquent Current Recorded Delinquent in Foreclosure Loans Loans Investment (Dollars in thousands) One- to four-family loans - originated $ 19,285 $ 7,093 $ 26,378 $ 5,869,289 $ 5,895,667 One- to four-family loans - purchased 7,305 8,956 16,261 472,114 488,375 Multi-family and commercial loans — — — 120,405 120,405 Consumer - home equity 703 497 1,200 124,644 125,844 Consumer - other 17 12 29 4,150 4,179 $ 27,310 $ 16,558 $ 43,868 $ 6,590,602 $ 6,634,470 The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $4.2 million at December 31, 2015. The recorded investment of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process as of December 31, 2015 was $5.0 million . The following table presents the recorded investment, by class, in loans classified as nonaccrual at the dates presented. December 31, 2015 September 30, 2015 (Dollars in thousands) One- to four-family loans - originated $ 17,525 $ 16,093 One- to four-family loans - purchased 7,333 9,038 Multi-family and commercial loans — — Consumer - home equity 833 792 Consumer - other 26 12 $ 25,717 $ 25,935 In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any loans require classification. Loan classifications are defined as follows: • Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrower(s) have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan categories. • Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank will sustain some loss if the deficiencies are not corrected. • Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable. • Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted. The following table sets forth the recorded investment in loans classified as special mention or substandard, by class, at the dates presented. Special mention and substandard loans are included in the formula analysis model if the loans are not individually evaluated for loss. Loans classified as doubtful or loss are individually evaluated for loss. At the dates presented, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off. December 31, 2015 September 30, 2015 Special Mention Substandard Special Mention Substandard (Dollars in thousands) One- to four-family - originated $ 14,535 $ 30,308 $ 16,149 $ 29,282 One- to four-family - purchased 1,683 11,426 1,376 13,237 Multi-family and commercial — — — — Consumer - home equity 127 1,415 151 1,301 Consumer - other — 31 — 17 $ 16,345 $ 43,180 $ 17,676 $ 43,837 The following table shows the weighted average credit score and weighted average LTV for originated and purchased one- to four-family loans and originated consumer home equity loans at the dates presented. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are updated at least semiannually, with the last update in September 2015, from a nationally recognized consumer rating agency. The LTV ratios provide an estimate of the extent to which the Bank may incur a loss on any given loan that may go into foreclosure. The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination. December 31, 2015 September 30, 2015 Credit Score LTV Credit Score LTV One- to four-family - originated 765 65 % 765 65 % One- to four-family - purchased 752 65 752 65 Consumer - home equity 753 19 753 18 764 64 764 64 Troubled Debt Restructurings ("TDRs") - The following tables present the recorded investment prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do not reflect the recorded investment at the end of the periods indicated. Any increase in the recorded investment at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances. For the Three Months Ended December 31, 2015 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family loans - originated 30 $ 3,106 $ 3,165 One- to four-family loans - purchased 1 123 122 Multi-family and commercial loans — — — Consumer - home equity 4 61 61 Consumer - other — — — 35 $ 3,290 $ 3,348 For the Three Months Ended December 31, 2014 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family loans - originated 43 $ 5,324 $ 5,372 One- to four-family loans - purchased 2 266 268 Multi-family and commercial loans — — — Consumer - home equity 4 64 65 Consumer - other 3 12 12 52 $ 5,666 $ 5,717 The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured. For the Three Months Ended December 31, 2015 December 31, 2014 Number of Recorded Number of Recorded Contracts Investment Contracts Investment (Dollars in thousands) One- to four-family loans - originated 11 $ 800 19 $ 1,757 One- to four-family loans - purchased — — 2 268 Multi-family and commercial loans — — — — Consumer - home equity 2 78 1 15 Consumer - other — — 1 5 13 $ 878 23 $ 2,045 Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. A loan is considered impaired when, based on current information and events, it is probable that the Bank will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the loan agreement. December 31, 2015 September 30, 2015 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance ACL Investment Balance ACL (Dollars in thousands) With no related allowance recorded One- to four-family - originated $ 11,658 $ 12,298 $ — $ 11,169 $ 11,857 $ — One- to four-family - purchased 12,379 14,470 — 11,035 13,315 — Multi-family and commercial — — — — — — Consumer - home equity 672 873 — 591 837 — Consumer - other 11 38 — 13 40 — 24,720 27,679 — 22,808 26,049 — With an allowance recorded One- to four-family - originated 27,961 28,050 488 26,453 26,547 294 One- to four-family - purchased 844 824 12 3,764 3,731 110 Multi-family and commercial — — — — — — Consumer - home equity 898 898 56 869 870 62 Consumer - other 20 20 1 10 10 1 29,723 29,792 557 31,096 31,158 467 Total One- to four-family - originated 39,619 40,348 488 37,622 38,404 294 One- to four-family - purchased 13,223 15,294 12 14,799 17,046 110 Multi-family and commercial — — — — — — Consumer - home equity 1,570 1,771 56 1,460 1,707 62 Consumer - other 31 58 1 23 50 1 $ 54,443 $ 57,471 $ 557 $ 53,904 $ 57,207 $ 467 The following information pertains to impaired loans, by class, for the periods presented. For the Three Months Ended December 31, 2015 December 31, 2014 Average Interest Average Interest Recorded Income Recorded Income Investment Recognized Investment Recognized (Dollars in thousands) With no related allowance recorded One- to four-family - originated $ 10,972 $ 113 $ 13,256 $ 113 One- to four-family - purchased 11,090 51 11,749 51 Multi-family and commercial — — — — Consumer - home equity 574 8 515 8 Consumer - other 9 — 16 — 22,645 172 25,536 172 With an allowance recorded One- to four-family - originated 28,114 265 26,074 272 One- to four-family - purchased 3,246 7 2,122 12 Multi-family and commercial — — — — Consumer - home equity 954 11 586 6 Consumer - other 13 — 15 — 32,327 283 28,797 290 Total One- to four-family - originated 39,086 378 39,330 385 One- to four-family - purchased 14,336 58 13,871 63 Multi-family and commercial — — — — Consumer - home equity 1,528 19 1,101 14 Consumer - other 22 — 31 — $ 54,972 $ 455 $ 54,333 $ 462 Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented, and the ending balance of ACL based on the Company's impairment methodology. For the Three Months Ended December 31, 2015 One- to Four- One- to Four- One- to Four- Multi-family Family - Family - Family - and Originated Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 6,980 $ 1,434 $ 8,414 $ 742 $ 287 $ 9,443 Charge-offs (57 ) (175 ) (232 ) — (18 ) (250 ) Recoveries 3 — 3 — 5 8 Provision for credit losses (94 ) 31 (63 ) 59 4 — Ending balance $ 6,832 $ 1,290 $ 8,122 $ 801 $ 278 $ 9,201 For the Three Months Ended December 31, 2014 One- to Four- One- to Four- One- to Four- Multi-family Family - Family - Family - and Originated Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 6,263 $ 2,323 $ 8,586 $ 400 $ 241 $ 9,227 Charge-offs (58 ) (113 ) (171 ) — (35 ) (206 ) Recoveries 21 54 75 — 28 103 Provision for credit losses 258 (270 ) (12 ) 105 80 173 Ending balance $ 6,484 $ 1,994 $ 8,478 $ 505 $ 314 $ 9,297 The following is a summary of the loan portfolio and related ACL balances, at the dates presented, by loan portfolio segment disaggregated by the Company's impairment method. There was no ACL for loans individually evaluated for impairment at either date as all potential losses were charged-off. December 31, 2015 One- to Four- One- to Four- One- to Four- Multi-family Family - Family - Family - and Originated Purchased Total Commercial Consumer Total (Dollars in thousands) Recorded investment in loans collectively evaluated for impairment $ 5,932,297 $ 459,593 $ 6,391,890 $ 127,925 $ 129,769 $ 6,649,584 Recorded investment in loans individually evaluated for impairment 11,657 12,379 24,036 — 709 24,745 $ 5,943,954 $ 471,972 $ 6,415,926 $ 127,925 $ 130,478 $ 6,674,329 ACL for loans collectively evaluated for impairment $ 6,832 $ 1,290 $ 8,122 $ 801 $ 278 $ 9,201 September 30, 2015 One- to Four- One- to Four- One- to Four- Multi-family Family - Family - Family - and Originated Purchased Total Commercial Consumer Total (Dollars in thousands) Recorded investment in loans collectively evaluated for impairment $ 5,884,498 $ 477,340 $ 6,361,838 $ 120,405 $ 129,419 $ 6,611,662 Recorded investment in loans individually evaluated for impairment 11,169 11,035 22,204 — 604 22,808 $ 5,895,667 $ 488,375 $ 6,384,042 $ 120,405 $ 130,023 $ 6,634,470 ACL for loans collectively evaluated for impairment $ 6,980 $ 1,434 $ 8,414 $ 742 $ 287 $ 9,443 |
