| Loans Receivable And Allowance For Credit Losses | LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES Loans receivable, net at September 30, 2019 and 2018 is summarized as follows: 2019 2018 (Dollars in thousands) One- to four-family: Originated $ 3,873,851 $ 3,965,692 Correspondent purchased 2,349,877 2,505,987 Bulk purchased 252,347 293,607 Construction 36,758 33,149 Total 6,512,833 6,798,435 Commercial: Commercial real estate 583,617 426,243 Commercial and industrial 61,094 62,869 Construction 123,159 80,498 Total 767,870 569,610 Consumer: Home equity 120,587 129,588 Other 11,183 10,012 Total 131,770 139,600 Total loans receivable 7,412,473 7,507,645 Less: ACL 9,226 8,463 Discounts/unearned loan fees 31,058 33,933 Premiums/deferred costs (44,558 ) (49,236 ) $ 7,416,747 $ 7,514,485 Included in the loan portfolio at September 30, 2019 were $199.6 million of non-PCI loans and $2.1 million of PCI loans associated with the acquisition of CCB during fiscal year 2018. At September 30, 2019 , the Company had $3.6 million of net purchase discounts related to non-PCI loans and $474 thousand related to PCI loans. As of September 30, 2019 and 2018 , the Bank serviced loans for others aggregating $117.3 million and $134.2 million , respectively. Such loans are not included in the accompanying consolidated balance sheets. Servicing loans for others generally consists of collecting mortgage payments, maintaining escrow accounts, disbursing payments to investors and foreclosure processing. Loan servicing income includes servicing fees withheld from investors and certain charges collected from borrowers, such as late payment fees. The Bank held borrowers' escrow balances on loans serviced for others of $2.2 million and $2.4 million as of September 30, 2019 and 2018 , respectively. Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business. The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial loans. The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans 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. Generally, loans are underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau. 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. The underwriting standards for loans purchased from correspondent 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. The Bank also originates owner-occupied construction-to-permanent loans secured by one- to four-family residential real estate. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. 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. Commercial loans - The Bank's commercial real estate and commercial construction loans are originated by the Bank or are in participation with a lead bank. When underwriting a commercial real estate or commercial construction loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property. For commercial real estate and commercial construction participation loans, the Bank performs the same underwriting procedures as if the loan was being originated by the Bank. At the time of origination, LTV ratios on commercial real estate loans generally do not exceed 85% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15 . For commercial construction loans, LTV ratios generally do not exceed 80% of the projected appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.15 , but it applies to the projected cash flows, and the borrower must have successful experience with the construction and operation of properties similar to the subject property. Appraisals on properties securing these loans are performed by independent state certified fee appraisers. The Bank's commercial and industrial loans are generally made in the Bank's market areas and are underwritten on the basis of the borrower's ability to service the debt from income. Working capital loans are primarily collateralized by short-term assets whereas term loans are primarily collateralized by long-term assets. In general, commercial and industrial loans involve more credit risk than commercial real estate loans due to the type of collateral securing these loans, as well as the expectation that commercial and industrial loans generally will be serviced principally from the operations of the business, and those operations may not be successful. As a result of these additional complexities, variables and risks, these loans require more thorough underwriting and servicing than other types of loans. Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by deposits. The Bank also originates a very limited amount of unsecured loans. 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; (2) consumer; and (3) commercial. These segments are further divided into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, consumer - other, commercial - commercial real estate, and commercial - commercial and industrial. One- to four-family construction loans are included in either the originated class or correspondent purchased class, and commercial construction loans are included in the commercial real estate class. The Bank's primary credit quality indicators for the one- to four-family 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 commercial 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, less charge-offs and inclusive of unearned loan fees and deferred costs. At September 30, 2019 and 2018 , all loans 90 or more days delinquent were on nonaccrual status. September 30, 2019 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: Originated $ 7,187 $ 3,261 $ 10,448 $ 3,885,335 $ 3,895,783 Correspondent purchased 2,762 1,023 3,785 2,377,629 2,381,414 Bulk purchased 3,624 1,484 5,108 248,376 253,484 Commercial: Commercial real estate 762 — 762 702,377 703,139 Commercial and industrial 70 173 243 60,340 60,583 Consumer: Home equity 446 302 748 119,688 120,436 Other 78 21 99 11,035 11,134 $ 14,929 $ 6,264 $ 21,193 $ 7,404,780 $ 7,425,973 September 30, 2018 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: Originated $ 10,613 $ 5,025 $ 15,638 $ 3,968,362 $ 3,984,000 Correspondent purchased 3,846 458 4,304 2,536,913 2,541,217 Bulk purchased 3,521 3,063 6,584 288,386 294,970 Commercial: Commercial real estate 76 — 76 501,932 502,008 Commercial and industrial 250 — 250 61,255 61,505 Consumer: Home equity 472 521 993 128,351 129,344 Other 61 10 71 9,833 9,904 $ 18,839 $ 9,077 $ 27,916 $ 7,495,032 $ 7,522,948 The recorded investment in mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of September 30, 2019 and 2018 was $1.5 million and $2.9 million , respectively, which is included in loans 90 or more days delinquent or in foreclosure in the table above. 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 $745 thousand at September 30, 2019 and $1.3 million at September 30, 2018 . The following table presents the recorded investment, by class, in loans classified as nonaccrual at the dates presented. September 30, 2019 2018 (Dollars in thousands) One- to four-family: Originated $ 4,436 $ 6,503 Correspondent purchased 1,023 863 Bulk purchased 1,551 3,063 Commercial: Commercial real estate — — Commercial and industrial 173 — Consumer: Home equity 337 530 Other 21 10 $ 7,541 $ 10,969 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 ACL 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. The increase in special mention loans at September 30, 2019 compared to September 30, 2018 was due primarily to one commercial real estate participation loan that relates to a recently opened large hotel and convention center. Due to the identified credit weaknesses, management made the decision to classify the loan as special mention during the June 30, 2019 quarter. Management continues to closely monitor the hotel and convention center and surrounding activities. September 30, 2019 2018 Special Mention Substandard Special Mention Substandard (Dollars in thousands) One- to four-family: Originated $ 12,941 $ 15,628 $ 8,660 $ 22,409 Correspondent purchased 2,349 2,785 997 3,126 Bulk purchased 102 5,294 — 7,195 Commercial: Commercial real estate 52,891 2,472 1,251 1,368 Commercial and industrial 1,215 3,057 1,126 — Consumer: Home equity 280 696 298 894 Other 2 24 — 10 $ 69,780 $ 29,956 $ 12,332 $ 35,002 The following table shows the weighted average credit score and weighted average LTV for one- to four-family loans and 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 2019 , 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 consumer - home equity LTV does not take into account the first lien position, if applicable. 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. September 30, 2019 2018 Credit Score LTV Credit Score LTV One- to four-family - originated 768 62 % 767 63 % One- to four-family - correspondent 765 65 764 67 One- to four-family - bulk purchased 762 61 758 62 Consumer - home equity 754 19 750 22 766 62 765 63 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. During the fourth quarter of fiscal year 2017, management refined its methodology for assessing whether a loan modification qualifies as a TDR which, though not material, resulted in fewer loans being classified as TDRs in the current fiscal year and prior fiscal year. For the Year Ended September 30, 2019 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 3 $ 385 $ 386 Correspondent purchased — — — Bulk purchased 2 377 377 Commercial: Commercial real estate — — — Commercial and industrial — — — Consumer: Home equity — — — Other — — — 5 $ 762 $ 763 For the Year Ended September 30, 2018 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 5 $ 264 $ 281 Correspondent purchased 2 406 406 Bulk purchased — — — Commercial: Commercial real estate — — — Commercial and industrial — — — Consumer: Home equity — — — Other — — — 7 $ 670 $ 687 For the Year Ended September 30, 2017 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 112 $ 11,940 $ 12,402 Correspondent purchased 12 2,443 2,459 Bulk purchased 3 1,031 1,048 Commercial: Commercial real estate — — — Commercial and industrial — — — Consumer: Home equity 17 368 380 Other — — — 144 $ 15,782 $ 16,289 The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured. For the Years Ended September 30, 2019 September 30, 2018 September 30, 2017 Number of Recorded Number of Recorded Number of Recorded Contracts Investment Contracts Investment Contracts Investment (Dollars in thousands) One- to four-family: Originated 1 $ 45 22 $ 1,416 46 $ 4,561 Correspondent purchased — — 1 124 2 148 Bulk purchased — — 3 1,040 2 698 Commercial: Commercial real estate — — — — — — Commercial and industrial — — — — — — Consumer: Home equity — — 4 133 16 440 Other — — — — — — 1 $ 45 30 $ 2,713 66 $ 5,847 Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. All impaired loans were individually evaluated for loss and all losses were charged-off, resulting in no related ACL for these loans. September 30, 2019 September 30, 2018 Unpaid Unpaid Recorded Principal Recorded Principal Investment Balance Investment Balance (Dollars in thousands) One- to four-family: Originated $ 14,683 $ 15,241 $ 18,857 $ 19,388 Correspondent purchased 1,763 1,868 2,668 2,768 Bulk purchased 4,943 5,661 6,011 6,976 Commercial: Commercial real estate — — — — Commercial and industrial 60 184 — — Consumer: Home equity 345 462 504 720 Other — 29 — 25 $ 21,794 $ 23,445 $ 28,040 $ 29,877 The following information pertains to impaired loans, by class, for the periods presented. During the fourth quarter of fiscal year 2017, management refined its methodology for classifying loans as impaired. The change resulting from this refinement was immaterial. For the Years Ended September 30, 2019 September 30, 2018 September 30, 2017 Average Interest Average Interest Average Interest Recorded Income Recorded Income Recorded Income Investment Recognized Investment Recognized Investment Recognized (Dollars in thousands) With no related allowance recorded One- to four-family: Originated $ 16,030 $ 671 $ 23,847 $ 990 $ 24,122 $ 917 Correspondent purchased 2,071 82 3,204 112 3,346 118 Bulk purchased 5,257 180 6,438 191 9,852 194 Commercial: Commercial real estate — — — — — — Commercial and industrial 5 — — — — — Consumer: Home equity 417 28 588 39 988 86 Other — — — — 7 — 23,780 961 34,077 1,332 38,315 1,315 With an allowance recorded One- to four-family: Originated — — — — 11,469 434 Correspondent purchased — — — — 2,018 65 Bulk purchased — — — — 1,160 20 Commercial: Commercial real estate — — — — — — Commercial and industrial — — — — — — Consumer: Home equity — — — — 457 36 Other — — — — 10 1 — — — — 15,114 556 Total One- to four-family: Originated 16,030 671 23,847 990 35,591 1,351 Correspondent purchased 2,071 82 3,204 112 5,364 183 Bulk purchased 5,257 180 6,438 191 11,012 214 Commercial: Commercial real estate — — — — — — Commercial and industrial 5 — — — — — Consumer: Home equity 417 28 588 39 1,445 122 Other — — — — 17 1 $ 23,780 $ 961 $ 34,077 $ 1,332 $ 53,429 $ 1,871 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 Year Ended September 30, 2019 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 2,953 $ 1,861 $ 925 $ 5,739 $ 2,556 $ 168 $ 8,463 Charge-offs (75 ) — (26 ) (101 ) (124 ) (37 ) (262 ) Recoveries 22 — 106 128 49 98 275 Provision for credit losses (900 ) (658 ) (318 ) (1,876 ) 2,690 (64 ) 750 Ending balance $ 2,000 $ 1,203 $ 687 $ 3,890 $ 5,171 $ 165 $ 9,226 For the Year Ended September 30, 2018 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 3,173 $ 1,922 $ 1,000 $ 6,095 $ 2,112 $ 191 $ 8,398 Charge-offs (136 ) (128 ) — (264 ) — (38 ) (302 ) Recoveries 144 — 196 340 — 27 367 Provision for credit losses (228 ) 67 (271 ) (432 ) 444 (12 ) — Ending balance $ 2,953 $ 1,861 $ 925 $ 5,739 $ 2,556 $ 168 $ 8,463 For the Year Ended September 30, 2017 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 3,928 $ 2,102 $ 1,065 $ 7,095 $ 1,208 $ 237 $ 8,540 Charge-offs (72 ) — (216 ) (288 ) — (60 ) (348 ) Recoveries 4 — 165 169 — 37 206 Provision for credit losses (687 ) (180 ) (14 ) (881 ) 904 (23 ) — Ending balance $ 3,173 $ 1,922 $ 1,000 $ 6,095 $ 2,112 $ 191 $ 8,398 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 losses were charged-off. September 30, 2019 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Recorded investment in loans collectively evaluated for impairment $ 3,881,100 $ 2,379,651 $ 248,541 $ 6,509,292 $ 763,662 $ 131,225 $ 7,404,179 Recorded investment in loans individually evaluated for impairment 14,683 1,763 4,943 21,389 60 345 21,794 $ 3,895,783 $ 2,381,414 $ 253,484 $ 6,530,681 $ 763,722 $ 131,570 $ 7,425,973 ACL for loans collectively evaluated for impairment $ 2,000 $ 1,203 $ 687 $ 3,890 $ 5,171 $ 165 $ 9,226 September 30, 2018 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Recorded investment in loans collectively evaluated for impairment $ 3,965,143 $ 2,538,549 $ 288,959 $ 6,792,651 $ 563,513 $ 138,744 $ 7,494,908 Recorded investment in loans individually evaluated for impairment 18,857 2,668 6,011 27,536 — 504 28,040 $ 3,984,000 $ 2,541,217 $ 294,970 $ 6,820,187 $ 563,513 $ 139,248 $ 7,522,948 ACL for loans collectively evaluated for impairment $ 2,953 $ 1,861 $ 925 $ 5,739 $ 2,556 $ 168 $ 8,463 |
