| 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: March 31, 2020 September 30, 2019 (Dollars in thousands) One- to four-family: Originated $ 3,944,782 $ 3,873,851 Correspondent purchased 2,385,907 2,349,877 Bulk purchased 228,730 252,347 Construction 35,798 36,758 Total 6,595,217 6,512,833 Commercial: Commercial real estate 584,236 583,617 Commercial and industrial 62,153 61,094 Construction 126,266 123,159 Total 772,655 767,870 Consumer: Home equity 114,571 120,587 Other 10,837 11,183 Total 125,408 131,770 Total loans receivable 7,493,280 7,412,473 Less: ACL 31,196 9,226 Discounts/unearned loan fees 29,645 31,058 Premiums/deferred costs (44,366 ) (44,558 ) $ 7,476,805 $ 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 March 31, 2020 and September 30, 2019 , all loans 90 or more days delinquent were on nonaccrual status. March 31, 2020 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 $ 8,333 $ 4,503 $ 12,836 $ 3,953,549 $ 3,966,385 Correspondent purchased 4,602 1,362 5,964 2,411,591 2,417,555 Bulk purchased 2,950 641 3,591 226,167 229,758 Commercial: Commercial real estate 1,560 546 2,106 705,058 707,164 Commercial and industrial — 172 172 61,695 61,867 Consumer: Home equity 594 304 898 113,577 114,475 Other 34 22 56 10,741 10,797 $ 18,073 $ 7,550 $ 25,623 $ 7,482,378 $ 7,508,001 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 March 31, 2020 and September 30, 2019 was $1.7 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 $187 thousand at March 31, 2020 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. March 31, 2020 September 30, 2019 (Dollars in thousands) One- to four-family: Originated $ 5,313 $ 4,436 Correspondent purchased 1,553 1,023 Bulk purchased 775 1,551 Commercial: Commercial real estate 670 — Commercial and industrial 172 173 Consumer: Home equity 347 337 Other 22 21 $ 8,852 $ 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. March 31, 2020 September 30, 2019 Special Mention Substandard Special Mention Substandard (Dollars in thousands) One- to four-family: Originated $ 10,586 $ 17,308 $ 12,941 $ 15,628 Correspondent purchased 3,092 3,741 2,349 2,785 Bulk purchased — 4,910 102 5,294 Commercial: Commercial real estate 51,416 2,232 52,891 2,472 Commercial and industrial 1,082 2,301 1,215 3,057 Consumer: Home equity 471 637 280 696 Other 7 22 2 24 $ 66,654 $ 31,151 $ 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 annually, 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. March 31, 2020 September 30, 2019 Credit Score LTV Credit Score LTV One- to four-family - originated 767 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 752 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 For the Six Months Ended March 31, 2020 March 31, 2020 Number Pre- Post- Number Pre- Post- of Restructured Restructured of Restructured Restructured Contracts Outstanding Outstanding Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 3 $ 138 $ 140 5 $ 241 $ 242 Correspondent purchased 1 192 191 1 192 191 Bulk purchased — — — 1 75 134 Commercial: Commercial real estate 1 837 837 1 837 837 Commercial and industrial — — — — — — Consumer: Home equity 2 45 44 2 45 44 Other — — — — — — 7 $ 1,212 $ 1,212 10 $ 1,390 $ 1,448 For the Three Months Ended For the Six Months Ended March 31, 2019 March 31, 2019 Number Pre- Post- Number Pre- Post- of Restructured Restructured of Restructured Restructured Contracts Outstanding Outstanding Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated — $ — $ — 1 $ 117 $ 117 Correspondent purchased — — — — — — Bulk purchased 1 308 308 1 308 308 Commercial: Commercial real estate — — — — — — Commercial and industrial — — — — — — Consumer: Home equity — — — — — — Other — — — — — — 1 $ 308 $ 308 2 $ 425 $ 425 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 For the Six Months Ended March 31, 2020 March 31, 2019 March 31, 2020 March 31, 2019 Number of Recorded Number of Recorded Number of Recorded Number of Recorded Contracts Investment Contracts Investment Contracts Investment Contracts Investment (Dollars in thousands) One- to four-family: Originated — $ — 1 $ 45 1 $ 38 1 $ 45 Correspondent purchased — — — — — — — — Bulk purchased — — — — 1 134 — — Commercial: Commercial real estate — — — — — — — — Commercial and industrial — — — — — — — — Consumer: Home equity 1 9 — — 1 9 — — Other — — — — — — — — 1 $ 9 1 $ 45 3 $ 181 1 $ 45 In late March 2020, the Bank announced loan modification programs to support and provide relief for its borrowers during the Coronavirus Disease 2019 ("COVID-19") pandemic. Generally, loan modifications under these programs ("COVID-19 loan modifications") for one- to four-family loans and consumer loans consist of a three-month payment forbearance, with the deferred principal, interest, and escrow added to the loan payoff amount. COVID-19 loan modifications of commercial loans mainly consist of up to a six-month interest-only payment period. The COVID-19 loan modifications are not considered troubled debt restructurings per current GAAP, nor are the loans with payment forbearance reported as past due or placed on non-accrual status during the forbearance time period. Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. March 31, 2020 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 $ 14,406 $ 15,013 $ — $ 14,683 $ 15,241 $ — Correspondent purchased 1,946 2,049 — 1,763 1,868 — Bulk purchased 4,909 5,630 — 4,943 5,661 — Commercial: Commercial real estate 512 840 — — — — Commercial and industrial — 148 — 60 184 — Consumer: Home equity 336 446 — 345 462 — Other — 33 — — 29 — 22,109 24,159 — 21,794 23,445 — With an allowance recorded One- to four-family: Originated — — — — — — Correspondent purchased — — — — — — Bulk purchased — — — — — — Commercial: Commercial real estate — — — — — — Commercial and industrial 2,076 2,074 240 — — — Consumer: Home equity — — — — — — Other — — — — — — 2,076 2,074 240 — — — Total One- to four-family: Originated 14,406 15,013 — 14,683 15,241 — Correspondent purchased 1,946 2,049 — 1,763 1,868 — Bulk purchased 4,909 5,630 — 4,943 5,661 — Commercial: Commercial real estate 512 840 — — — — Commercial and industrial 2,076 2,222 240 60 184 — Consumer: Home equity 336 446 — 345 462 — Other — 33 — — 29 — $ 24,185 $ 26,233 $ 240 $ 21,794 $ 23,445 $ — The following information pertains to impaired loans, by class, for the periods presented. For the Three Months Ended For the Six Months Ended March 31, 2020 March 31, 2019 March 31, 2020 March 31, 2019 Average Interest Average Interest Average Interest Average Interest Recorded Income Recorded Income Recorded Income Recorded Income Investment Recognized Investment Recognized Investment Recognized Investment Recognized (Dollars in thousands) With no related allowance recorded One- to four-family: Originated $ 14,441 $ 161 $ 15,928 $ 167 $ 14,526 $ 322 $ 16,980 $ 352 Correspondent purchased 1,854 19 2,177 23 1,814 37 2,251 45 Bulk purchased 4,965 50 5,230 43 4,965 102 5,453 86 Commercial: Commercial real estate 547 4 — — 312 4 — — Commercial and industrial — — — — 19 — — — Consumer: Home equity 332 5 436 7 335 11 461 16 Other — — — — — — — — 22,139 239 23,771 240 21,971 476 25,145 499 With an allowance recorded One- to four-family: Originated — — — — — — — — Correspondent purchased — — — — — — — — Bulk purchased — — — — — — — — Commercial: Commercial real estate — — — — — — — — Commercial and industrial 2,244 42 — — 1,282 54 — — Consumer: Home equity — — — — — — — — Other — — — — — — — — 2,244 42 — — 1,282 54 — — Total One- to four-family: Originated 14,441 161 15,928 167 14,526 322 16,980 352 Correspondent purchased 1,854 19 2,177 23 1,814 37 2,251 45 Bulk purchased 4,965 50 5,230 43 4,965 102 5,453 86 Commercial: Commercial real estate 547 4 — — 312 4 — — Commercial and industrial 2,244 42 — — 1,301 54 — — Consumer: Home equity 332 5 436 7 335 11 461 16 Other — — — — — — — — $ 24,383 $ 281 $ 23,771 $ 240 $ 23,253 $ 530 $ 25,145 $ 499 Allowance for Credit Losses - Management maintains an ACL to absorb inherent losses in the loan portfolio based on quarterly assessments of the loan portfolio. Each quarter a formula analysis model is prepared which segregates the loan portfolio into categories based on certain risk characteristics. Historical loss factors and qualitative factors are applied to each loan category in the formula analysis model. The factors are reviewed by management quarterly to assess whether the factors adequately cover probable and estimable losses inherent in the loan portfolio. Due to the deterioration of economic conditions as a result of the COVID-19 pandemic, management increased some of the historical loss factors and qualitative factors in the formula analysis model to account for the increase in the estimated inherent losses in the loan portfolio at March 31, 2020 which accounts for the majority of the increase in the ACL during the current quarter. If economic conditions continue to worsen and/or the current and future government programs do not provide adequate relief to borrowers, it is possible the Bank's ACL will need to increase in future periods. 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 March 31, 2020 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 2,047 $ 1,200 $ 612 $ 3,859 $ 5,418 $ 158 $ 9,435 Charge-offs (46 ) — — (46 ) (325 ) (4 ) (375 ) Recoveries 3 — — 3 54 4 61 Provision for credit losses 4,463 2,155 (55 ) 6,563 15,181 331 22,075 Ending balance $ 6,467 $ 3,355 $ 557 $ 10,379 $ 20,328 $ 489 $ 31,196 For the Six Months Ended March 31, 2020 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 (64 ) — — (64 ) (349 ) (10 ) (423 ) Recoveries 3 — — 3 81 9 93 Provision for credit losses 4,528 2,152 (130 ) 6,550 15,425 325 22,300 Ending balance $ 6,467 $ 3,355 $ 557 $ 10,379 $ 20,328 $ 489 $ 31,196 For the Three Months Ended March 31, 2019 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 2,761 $ 1,748 $ 836 $ 5,345 $ 3,034 $ 179 $ 8,558 Charge-offs (10 ) — — (10 ) — (2 ) (12 ) Recoveries 2 — 17 19 25 29 73 Provision for credit losses (580 ) (356 ) (51 ) (987 ) 1,029 (42 ) — Ending balance $ 2,173 $ 1,392 $ 802 $ 4,367 $ 4,088 $ 164 $ 8,619 For the Six Months Ended March 31, 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 (30 ) — (26 ) (56 ) — (12 ) (68 ) Recoveries 5 — 106 111 27 86 224 Provision for credit losses (755 ) (469 ) (203 ) (1,427 ) 1,505 (78 ) — Ending balance $ 2,173 $ 1,392 $ 802 $ 4,367 $ 4,088 $ 164 $ 8,619 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. March 31, 2020 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Recorded investment in loans: Collectively evaluated for impairment $ 3,951,979 $ 2,415,609 $ 224,849 $ 6,592,437 $ 766,443 $ 124,936 $ 7,483,816 Individually evaluated for impairment 14,406 1,946 4,909 21,261 2,588 336 24,185 $ 3,966,385 $ 2,417,555 $ 229,758 $ 6,613,698 $ 769,031 $ 125,272 $ 7,508,001 ACL for loans: Collectively evaluated for impairment $ 6,467 $ 3,355 $ 557 $ 10,379 $ 20,088 $ 489 $ 30,956 Individually evaluated for impairment — — — — 240 — 240 $ 6,467 $ 3,355 $ 557 $ 10,379 $ 20,328 $ 489 $ 31,196 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 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 Individually evaluated for impairment — — — — — — — $ 2,000 $ 1,203 $ 687 $ 3,890 $ 5,171 $ 165 $ 9,226 |
