Loans Receivable And Allowance For Credit Losses | LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES Loans receivable, net at the dates presented is summarized as follows: December 31, 2019 September 30, 2019 (Dollars in thousands) One- to four-family: Originated $ 3,927,015 $ 3,873,851 Correspondent purchased 2,343,750 2,349,877 Bulk purchased 237,691 252,347 Construction 38,771 36,758 Total 6,547,227 6,512,833 Commercial: Commercial real estate 583,848 583,617 Commercial and industrial 57,019 61,094 Construction 107,372 123,159 Total 748,239 767,870 Consumer: Home equity 118,491 120,587 Other 10,877 11,183 Total 129,368 131,770 Total loans receivable 7,424,834 7,412,473 Less: ACL 9,435 9,226 Discounts/unearned loan fees 30,323 31,058 Premiums/deferred costs (44,131 ) (44,558 ) $ 7,429,207 $ 7,416,747 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 ("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. 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, loan-to-value ("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 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 December 31, 2019 and September 30, 2019 , all loans 90 or more days delinquent were on nonaccrual status. December 31, 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 $ 8,980 $ 3,527 $ 12,507 $ 3,938,497 $ 3,951,004 Correspondent purchased 4,179 1,395 5,574 2,369,379 2,374,953 Bulk purchased 3,345 701 4,046 234,723 238,769 Commercial: Commercial real estate 963 — 963 687,095 688,058 Commercial and industrial 231 — 231 56,385 56,616 Consumer: Home equity 442 328 770 117,637 118,407 Other 45 12 57 10,778 10,835 $ 18,185 $ 5,963 $ 24,148 $ 7,414,494 $ 7,438,642 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 The recorded investment in mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2019 and September 30, 2019 was $1.6 million and $1.5 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 $512 thousand at December 31, 2019 and $745 thousand at September 30, 2019 . The following table presents the recorded investment, by class, in loans classified as nonaccrual at the dates presented. December 31, 2019 September 30, 2019 (Dollars in thousands) One- to four-family: Originated $ 4,159 $ 4,436 Correspondent purchased 1,395 1,023 Bulk purchased 835 1,551 Commercial: Commercial real estate 187 — Commercial and industrial 175 173 Consumer: Home equity 328 337 Other 12 21 $ 7,091 $ 7,541 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. December 31, 2019 September 30, 2019 Special Mention Substandard Special Mention Substandard (Dollars in thousands) One- to four-family: Originated $ 12,558 $ 16,901 $ 12,941 $ 15,628 Correspondent purchased 3,102 3,248 2,349 2,785 Bulk purchased 100 5,080 102 5,294 Commercial: Commercial real estate 51,556 2,599 52,891 2,472 Commercial and industrial 1,232 2,752 1,215 3,057 Consumer: Home equity 366 673 280 696 Other 8 10 2 24 $ 68,922 $ 31,263 $ 69,780 $ 29,956 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. December 31, 2019 September 30, 2019 Credit Score LTV Credit Score LTV One- to four-family - originated 768 62 % 768 62 % One- to four-family - correspondent 764 65 765 65 One- to four-family - bulk purchased 763 61 762 61 Consumer - home equity 754 19 754 19 766 62 766 62 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, 2019 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 2 $ 103 $ 102 Correspondent purchased — — — Bulk purchased 1 75 134 Commercial: Commercial real estate — — — Commercial and industrial — — — Consumer: Home equity — — — Other — — — 3 $ 178 $ 236 For the Three Months Ended December 31, 2018 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 1 $ 117 $ 117 Correspondent purchased — — — Bulk purchased — — — Commercial: Commercial real estate — — — Commercial and industrial — — — Consumer: Home equity — — — Other — — — 1 $ 117 $ 117 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, 2019 December 31, 2018 Number of Recorded Number of Recorded Contracts Investment Contracts Investment (Dollars in thousands) One- to four-family: Originated 1 $ 38 — $ — Correspondent purchased — — — — Bulk purchased 1 134 — — Commercial: Commercial real estate — — — — Commercial and industrial — — — — Consumer: Home equity — — — — Other — — — — 2 $ 172 — $ — Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. December 31, 2019 September 30, 2019 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 $ 14,568 $ 15,135 $ — $ 14,683 $ 15,241 $ — Correspondent purchased 1,756 1,861 — 1,763 1,868 — Bulk purchased 5,020 5,737 — 4,943 5,661 — Commercial: Commercial real estate — — — — — — Commercial and industrial — 148 — 60 184 — Consumer: Home equity 327 440 — 345 462 — Other — 31 — — 29 — 21,671 23,352 — 21,794 23,445 — With an allowance recorded One- to four-family: Originated — — — — — — Correspondent purchased — — — — — — Bulk purchased — — — — — — Commercial: Commercial real estate — — — — — — Commercial and industrial 2,432 2,432 225 — — — Consumer: Home equity — — — — — — Other — — — — — — 2,432 2,432 225 — — — Total One- to four-family: Originated 14,568 15,135 — 14,683 15,241 — Correspondent purchased 1,756 1,861 — 1,763 1,868 — Bulk purchased 5,020 5,737 — 4,943 5,661 — Commercial: Commercial real estate — — — — — — Commercial and industrial 2,432 2,580 225 60 184 — Consumer: Home equity 327 440 — 345 462 — Other — 31 — — 29 — $ 24,103 $ 25,784 $ 225 $ 21,794 $ 23,445 $ — The following information pertains to impaired loans, by class, for the periods presented. For the Three Months Ended December 31, 2019 December 31, 2018 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 $ 14,621 $ 161 $ 18,049 $ 185 Correspondent purchased 1,760 18 2,309 22 Bulk purchased 4,978 52 5,632 43 Commercial: Commercial real estate — — — — Commercial and industrial 33 — — — Consumer: Home equity 337 6 489 9 Other — — — — 21,729 237 26,479 259 With an allowance recorded One- to four-family: Originated — — — — Correspondent purchased — — — — Bulk purchased — — — — Commercial: Commercial real estate — — — — Commercial and industrial 608 12 — — Consumer: Home equity — — — — Other — — — — 608 12 — — Total One- to four-family: Originated 14,621 161 18,049 185 Correspondent purchased 1,760 18 2,309 22 Bulk purchased 4,978 52 5,632 43 Commercial: Commercial real estate — — — — Commercial and industrial 641 12 — — Consumer: Home equity 337 6 489 9 Other — — — — $ 22,337 $ 249 $ 26,479 $ 259 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, 2019 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 2,000 $ 1,203 $ 687 $ 3,890 $ 5,171 $ 165 $ 9,226 Charge-offs (18 ) — — (18 ) (24 ) (6 ) (48 ) Recoveries — — — — 27 5 32 Provision for credit losses 65 (3 ) (75 ) (13 ) 244 (6 ) 225 Ending balance $ 2,047 $ 1,200 $ 612 $ 3,859 $ 5,418 $ 158 $ 9,435 For the Three Months Ended December 31, 2018 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 (20 ) — (26 ) (46 ) — (10 ) (56 ) Recoveries 3 — 89 92 2 57 151 Provision for credit losses (175 ) (113 ) (152 ) (440 ) 476 (36 ) — Ending balance $ 2,761 $ 1,748 $ 836 $ 5,345 $ 3,034 $ 179 $ 8,558 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. December 31, 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 $ 3,936,436 $ 2,373,197 $ 233,749 $ 6,543,382 $ 742,242 $ 128,915 $ 7,414,539 Recorded investment in loans individually evaluated for impairment 14,568 1,756 5,020 21,344 2,432 327 24,103 $ 3,951,004 $ 2,374,953 $ 238,769 $ 6,564,726 $ 744,674 $ 129,242 $ 7,438,642 ACL for loans collectively evaluated for impairment $ 2,047 $ 1,200 $ 612 $ 3,859 $ 5,193 $ 158 $ 9,210 ACL for loans individually evaluated for impairment — — — — 225 — 225 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 ACL for loans individually evaluated for impairment — — — — — — — |