| 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, 2020 September 30, 2020 (Dollars in thousands) One- to four-family: Originated $ 3,946,073 $ 3,937,310 Correspondent purchased 1,974,086 2,101,082 Bulk purchased 199,673 208,427 Construction 32,871 34,593 Total 6,152,703 6,281,412 Commercial: Commercial real estate 609,936 626,588 Commercial and industrial 69,378 97,614 Construction 84,564 105,458 Total 763,878 829,660 Consumer: Home equity 97,717 103,838 Other 9,328 10,086 Total 107,045 113,924 Total loans receivable 7,023,626 7,224,996 Less: ACL 26,125 31,527 Discounts/unearned loan fees 28,825 29,190 Premiums/deferred costs (35,418) (38,572) $ 7,004,094 $ 7,202,851 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, 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. With the exception of Paycheck Protection Program ("PPP") loans, 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. See discussion regarding the credit risks for these loan segments in Note 1. Summary of Significant Accounting Policies - Allowance for Credit Losses. These segments are further divided into classes for purposes of providing disaggregated credit quality information about 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. As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to loan classification and delinquency status. Loan Classification - 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, as of December 31, 2020, the amortized cost of loans by class of financing receivable, year of origination and loan classification. All revolving lines of credit are presented separately, regardless of origination year. Loans classified as doubtful or loss are individually evaluated for loss. At December 31, 2020, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off. December 31, 2020 Current Fiscal Fiscal Fiscal Fiscal Revolving Fiscal Year Year Year Year Prior Line of Year 2020 2019 2018 2017 Years Credit Total (Dollars in thousands) One- to four-family: Originated Pass $ 274,145 $ 805,755 $ 404,651 $ 315,587 $ 354,212 $ 1,784,798 $ — $ 3,939,148 Special Mention 124 443 244 241 639 7,572 — 9,263 Substandard — 285 903 52 259 14,364 — 15,863 Correspondent purchased Pass 58,120 408,309 112,323 200,255 246,482 963,862 — 1,989,351 Special Mention — — — — — 3,149 — 3,149 Substandard — — — — — 5,498 — 5,498 Bulk purchased Pass — — — — — 194,336 — 194,336 Special Mention — — — — — 96 — 96 Substandard — — — — — 6,124 — 6,124 332,389 1,214,792 518,121 516,135 601,592 2,979,799 — 6,162,828 Commercial: Commercial real estate Pass 68,729 155,596 129,381 122,344 51,233 53,767 5,895 586,945 Special Mention — — — — — 101,276 — 101,276 Substandard 1,296 674 229 695 391 — — 3,285 Commercial and industrial Pass 4,856 34,835 9,295 4,342 3,886 1,031 8,487 66,732 Special Mention — — 223 — 402 — — 625 Substandard — 2 — 94 54 — 1,336 1,486 74,881 191,107 139,128 127,475 55,966 156,074 15,718 760,349 Consumer: Home equity Pass 467 3,653 2,540 2,051 908 3,505 83,639 96,763 Special Mention — — — 13 — 9 236 258 Substandard — — — — — 24 687 711 Other Pass 1,166 3,309 2,182 1,392 691 277 278 9,295 Special Mention — — — — — — — — Substandard — 4 — 5 4 2 — 15 1,633 6,966 4,722 3,461 1,603 3,817 84,840 107,042 Total $ 408,903 $ 1,412,865 $ 661,971 $ 647,071 $ 659,161 $ 3,139,690 $ 100,558 $ 7,030,219 The following table sets forth the recorded investment in loans classified as special mention or substandard, by class, at September 30, 2020 (prior to the adoption of CECL). At that date, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off. September 30, 2020 Special Mention Substandard (Dollars in thousands) One- to four-family: Originated $ 9,249 $ 15,729 Correspondent purchased 2,076 4,512 Bulk purchased — 5,319 Commercial: Commercial real estate 50,957 3,541 Commercial and industrial 1,040 1,368 Consumer: Home equity 331 581 Other — 8 $ 63,653 $ 31,058 Delinquency Status - The following table sets forth, as of December 31, 2020, the amortized cost of current loans, loans 30 to 89 days delinquent, and loans 90 or more days delinquent or in foreclosure ("90+/FC"), by class of financing receivable and year of origination. All revolving lines of credit are presented separately, regardless of origination year. December 31, 2020 Current Fiscal Fiscal Fiscal Fiscal Revolving Fiscal Year Year Year Year Prior Line of Year 2020 2019 2018 2017 Years Credit Total (Dollars in thousands) One- to four-family: Originated Current $ 274,269 $ 806,483 $ 405,610 $ 315,538 $ 354,482 $ 1,797,714 $ — $ 3,954,096 30-89 — — — 290 369 5,164 — 5,823 90+/FC — — 188 52 259 3,856 — 4,355 Correspondent purchased Current 58,120 408,309 112,153 199,766 246,078 965,396 — 1,989,822 30-89 — — 170 489 404 3,694 — 4,757 90+/FC — — — — — 3,419 — 3,419 Bulk purchased Current — — — — — 195,018 — 195,018 30-89 — — — — — 1,768 — 1,768 90+/FC — — — — — 3,770 — 3,770 332,389 1,214,792 518,121 516,135 601,592 2,979,799 — 6,162,828 Commercial: Commercial real estate Current 70,025 155,490 129,381 122,444 51,624 155,005 5,895 689,864 30-89 — 106 229 595 — 38 — 968 90+/FC — 674 — — — — — 674 Commercial and industrial Current 4,856 34,835 9,448 4,341 4,288 1,031 9,823 68,622 30-89 — — 70 1 — — — 71 90+/FC — 2 — 94 54 — — 150 74,881 191,107 139,128 127,475 55,966 156,074 15,718 760,349 Consumer: Home equity Current 467 3,653 2,540 2,064 908 3,484 83,678 96,794 30-89 — — — — — 41 439 480 90+/FC — — — — — 13 445 458 Other Current 1,165 3,292 2,170 1,388 691 277 278 9,261 30-89 1 17 12 4 — — — 34 90+/FC — 4 — 5 4 2 — 15 1,633 6,966 4,722 3,461 1,603 3,817 84,840 107,042 Total $ 408,903 $ 1,412,865 $ 661,971 $ 647,071 $ 659,161 $ 3,139,690 $ 100,558 $ 7,030,219 Delinquent and Nonaccrual Loans - The following tables present the amortized cost at December 31, 2020 and, prior to the adoption of CECL, the recorded investment, which is identical to amortized cost, at September 30, 2020, by class, of loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total. At December 31, 2020 and September 30, 2020, all loans 90 or more days delinquent were on nonaccrual status. December 31, 2020 90 or More Days Total Total 30 to 89 Days Delinquent or Delinquent Current Amortized Delinquent in Foreclosure Loans Loans Cost (Dollars in thousands) One- to four-family: Originated $ 5,823 $ 4,355 $ 10,178 $ 3,954,096 $ 3,964,274 Correspondent purchased 4,757 3,419 8,176 1,989,822 1,997,998 Bulk purchased 1,768 3,770 5,538 195,018 200,556 Commercial: Commercial real estate 968 674 1,642 689,864 691,506 Commercial and industrial 71 150 221 68,622 68,843 Consumer: Home equity 480 458 938 96,794 97,732 Other 34 15 49 9,261 9,310 $ 13,901 $ 12,841 $ 26,742 $ 7,003,477 $ 7,030,219 September 30, 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 $ 3,001 $ 4,347 $ 7,348 $ 3,950,387 $ 3,957,735 Correspondent purchased 3,170 2,433 5,603 2,122,085 2,127,688 Bulk purchased 2,558 2,938 5,496 203,844 209,340 Commercial: Commercial real estate 40 1,206 1,246 728,191 729,437 Commercial and industrial 5 157 162 96,124 96,286 Consumer: Home equity 323 296 619 103,210 103,829 Other 75 8 83 9,980 10,063 $ 9,172 $ 11,385 $ 20,557 $ 7,213,821 $ 7,234,378 The amortized cost of mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of December 31, 2020 and September 30, 2020 was $912 thousand 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 $129 thousand at December 31, 2020 and $183 thousand at September 30, 2020. The following table presents the amortized cost at December 31, 2020 and, prior to the adoption of CECL, the recorded investment at September 30, 2020, by class, of loans classified as nonaccrual. Additionally, the amortized cost of nonaccrual loans that had no related ACL is presented as of December 31, 2020, all of which were individually evaluated for loss and any identified losses have been charged off. December 31, 2020 September 30, 2020 Nonaccrual Loans Nonaccrual Loans with No ACL Nonaccrual Loans (Dollars in thousands) One- to four-family: Originated $ 5,323 $ 2,361 $ 5,037 Correspondent purchased 3,418 308 2,433 Bulk purchased 3,771 1,463 2,938 Commercial: Commercial real estate 1,076 72 1,663 Commercial and industrial 150 94 157 Consumer: Home equity 467 9 305 Other 15 — 8 $ 14,220 $ 4,307 $ 12,541 Troubled Debt Restructurings - The following tables present the amortized cost for the current period and, prior to the adoption of CECL, the recorded investment for the prior period, prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do not reflect the amortized cost at the end of the periods indicated. Any increase in the amortized cost 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, 2020 Number Pre- Post- of Restructured Restructured Contracts Outstanding Outstanding (Dollars in thousands) One- to four-family: Originated 4 $ 647 $ 645 Correspondent purchased — — — Bulk purchased — — — Commercial: Commercial real estate — — — Commercial and industrial — — — Consumer: Home equity — — — Other — — — 4 $ 647 $ 645 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 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, 2020 December 31, 2019 Number of Amortized Number of Recorded Contracts Cost 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 date and for the period presented (prior to the adoption of CECL). Prior to the adoption of CECL, a loan was considered impaired when, based on current information and events, it was probable that the Bank would be unable to collect all amounts due, including principal and interest, according to the original contractual terms of the loan agreement. For the Three Months Ended September 30, 2020 December 31, 2019 Unpaid Average Interest Recorded Principal Related Recorded Income Investment Balance ACL Investment Recognized (Dollars in thousands) With no related allowance recorded One- to four-family: Originated $ 12,385 $ 12,813 $ — $ 14,621 $ 161 Correspondent purchased 1,955 2,058 — 1,760 18 Bulk purchased 3,843 4,302 — 4,978 52 Commercial: Commercial real estate 1,052 1,379 — — — Commercial and industrial 99 244 — 33 — Consumer: Home equity 280 360 — 337 6 Other — 45 — — — 19,614 21,201 — 21,729 237 With an allowance recorded One- to four-family: Originated — — — — — Correspondent purchased — — — — — Bulk purchased — — — — — Commercial: Commercial real estate 660 660 83 — — Commercial and industrial 1,269 1,268 240 608 12 Consumer: Home equity — — — — — Other — — — — — 1,929 1,928 323 608 12 Total One- to four-family: Originated 12,385 12,813 — 14,621 161 Correspondent purchased 1,955 2,058 — 1,760 18 Bulk purchased 3,843 4,302 — 4,978 52 Commercial: Commercial real estate 1,712 2,039 83 — — Commercial and industrial 1,368 1,512 240 641 12 Consumer: Home equity 280 360 — 337 6 Other — 45 — — — $ 21,543 $ 23,129 $ 323 $ 22,337 $ 249 Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented. Activity during the three months ended December 31, 2019 occurred prior to the adoption of CECL. For the Three Months Ended December 31, 2020 One- to Four-Family Correspondent Bulk Originated Purchased Purchased Total Commercial Consumer Total (Dollars in thousands) Beginning balance $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,800 $ 484 $ 31,527 Adoption of CECL (4,452) (367) 436 (4,383) (193) (185) (4,761) Balance at October 1, 2020 1,633 2,324 903 4,860 21,607 299 26,766 Charge-offs (14) — — (14) (515) (3) (532) Recoveries 34 — — 34 12 22 68 Provision for credit losses (115) (566) (51) (732) 603 (48) (177) Ending balance $ 1,538 $ 1,758 $ 852 $ 4,148 $ 21,707 $ 270 $ 26,125 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 The following is a summary of the loan portfolio and related ACL balances by loan portfolio segment disaggregated by the Company's impairment method as of September 30, 2020 (prior to the adoption of CECL). September 30, 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 $ 3,945,350 $ 2,125,733 $ 205,497 $ 6,276,580 $ 822,643 $ 113,612 $ 7,212,835 Individually evaluated for impairment 12,385 1,955 3,843 18,183 3,080 280 21,543 $ 3,957,735 $ 2,127,688 $ 209,340 $ 6,294,763 $ 825,723 $ 113,892 $ 7,234,378 ACL for loans: Collectively evaluated for impairment $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,477 $ 484 $ 31,204 Individually evaluated for impairment — — — — 323 — 323 $ 6,085 $ 2,691 $ 467 $ 9,243 $ 21,800 $ 484 $ 31,527 The key assumptions in the Company's ACL model include the economic forecast, the forecast and reversion to mean time periods, and prepayment and curtailment assumptions. Management also considered certain qualitative factors when evaluating the adequacy of the ACL at December 31, 2020. The key assumptions utilized in estimating the Company's ACL at December 31, 2020 are discussed below. • Economic Forecast - Management considered several economic forecasts provided by a third party and selected the economic forecast believed to be the most appropriate considering the facts and circumstances at December 31, 2020. The forecasted economic indices applied to the model at December 31, 2020 were the national unemployment rate, changes in commercial real estate price index, changes in home values, and changes in the U.S. gross domestic product. The economic index most impactful to all loan pools within the model at December 31, 2020 was the national unemployment rate. The forecast national unemployment rate in the economic scenario selected by management at December 31, 2020 had the national unemployment rate peaking at 8.0% at June 30, 2021 and then a gradual decline to 7.5% at December 31, 2021 which was the end of our four quarter forecast time period. • Forecast and reversion to mean time period - The forecasted time period for all of the economic indices was four quarters at December 31, 2020. The reversion to mean time period was eight quarters for the national unemployment rate and four quarters for all other economic indices at December 31, 2020. • Prepayment and curtailment assumptions - The assumptions used at December 31, 2020 were generally based on actual prepayment and curtailment speeds for each respective loan pool in the model. • Qualitative factors - The qualitative considerations by management at December 31, 2020 included the COVID-19 loan modification programs considering the payment performance of the loans that had exited their deferral periods, the increase in special mention commercial loans during the current quarter and the special mention commercial loans still in their COVID-19 loan modification time period, and the economic uncertainties related to the political party changes in U.S. government offices, the effectiveness of the latest federal stimulus package, potential additional economic stimulus from the federal government, and the impact the increasing COVID-19 cases and limited vaccine distribution may have on the economy. Management determined a qualitative amount was not necessary at December 31, 2020 for the loans in the COVID-19 loan modification program due to the significant decrease in the dollar amount of the loans in the program and the fact that the majority of the loans that have exited the program are current on their payments. See discussion below regarding the qualitative amount at December 31, 2020 for special mention commercial loans and the economic uncertainty. At December 31, 2020, the ACL was composed of $15.1 million calculated by the model, $6.6 million related to the economic uncertainty qualitative factor, and $4.4 million related to the special mention qualitative factor, resulting in a total ACL of $26.1 million. The decrease in ACL during the current quarter was due to net charge-offs of $464 thousand and a negative provision for credit losses of $177 thousand. The negative provision for credit losses was due primarily to a reduction in the correspondent one-to four-family loan portfolio during the current quarter, partially offset by an increase in the commercial loan ACL due to the related qualitative factor. The commercial loan portfolio balance decreased during the current quarter, but due to the related qualitative factors, any reduction in the ACL due to a reduction in the loan balance was offset. The economic forecast selected at December 31, 2020 improved from October 1, 2020 when CECL was adopted by the Company, but the improvement in the forecast was largely offset by the qualitative factors discussed above. Reserve for Off-Balance Sheet Credit Exposures - The following is a summary of the changes in reserve for off-balance sheet credit exposures during the three months ended December 31, 2020 (dollars in thousands). Beginning balance $ — Adoption of CECL 7,788 Balance at October 1, 2020 7,788 Provision for credit losses (1,355) Ending balance $ 6,433 At December 31, 2020, the Company also applied a qualitative factor for economic uncertainty related to the calculation of the reserve for off-balance sheet credit exposures, but the impact of this qualitative factor was smaller compared to the economic uncertainty factor applied in the calculation of ACL, in consideration of the fact the commitments are being underwritten during a challenging economic environment and are still meeting/exceeding the Bank's conservative underwriting requirements. The $1.4 million reduction in the reserve compared to October 1, 2020, which was recognized as a negative provision for credit losses, was due to an improvement in the economic forecast during the current quarter, partially offset by an increase in the balance of off-balance sheet credit exposures. |
