| Loans Receivable | Loans Receivable Loans receivable consist of the following at the dates indicated: June 30, 2015 2014 (In thousands) One- to four-family $ 256,696 $ 241,910 Commercial 173,473 190,660 Consumer 44,585 50,761 Construction and land 19,127 20,497 493,881 503,828 Less: Net deferred loan fees 840 862 (Premium) on purchased loans, net (1,957 ) (1,290 ) Allowance for loan losses 7,111 8,072 5,994 7,644 Total loans receivable, net $ 487,887 $ 496,184 Note 3 - Loans Receivable (continued) Loans, by the earlier of next repricing date or maturity, at the dates indicated: June 30, 2015 2014 (In thousands) Adjustable-rate loans Due within one year $ 64,577 $ 84,008 After one but within five years 119,709 124,065 After five but within ten years 46,678 34,020 After ten years — — 230,964 242,093 Fixed-rate loans Due within one year 6,102 11,298 After one but within five years 23,974 19,619 After five but within ten years 42,458 47,709 After ten years 190,383 183,109 262,917 261,735 $ 493,881 $ 503,828 The adjustable-rate loans have interest rate adjustment limitations and are generally indexed to multiple indices. Future market factors may affect the correlation of adjustable loan interest rates with the rates First Federal pays on the short-term deposits that have been primarily used to fund such loans. Note 3 - Loans Receivable (continued) The following tables summarize changes in the ALLL and the loan portfolio by segment and impairment method for the periods shown: At or For the Year Ended June 30, 2015 One- to Four-Family Commercial Consumer Construction and Land Unallocated Total ALLL: (In thousands) Beginning balance $ 3,408 $ 2,354 $ 1,678 $ 397 $ 235 $ 8,072 Provision for loan losses 81 (680 ) 104 (29 ) 524 — Charge-offs (430 ) (177 ) (503 ) (49 ) — (1,159 ) Recoveries 84 3 94 17 — 198 Ending balance $ 3,143 $ 1,500 $ 1,373 $ 336 $ 759 $ 7,111 Allowance by portfolio segment: Total ALLL $ 3,143 $ 1,500 $ 1,373 $ 336 $ 759 $ 7,111 General reserve 2,982 1,381 1,242 318 759 6,682 Specific reserve 161 119 131 18 — 429 Loan balance: Total loans $ 256,696 $ 173,473 $ 44,585 $ 19,127 $ — $ 493,881 General reserves (1) 249,290 171,077 43,786 18,968 — 483,121 Specific reserves (2) 7,406 2,396 799 159 — 10,760 (1) Loans collectively evaluated for impairment included in general reserves. (2) Loans individually evaluated for impairment included in specific reserves. Note 3 - Loans Receivable (continued) The following tables summarize changes in the ALLL and loan portfolio by segment and impairment method for the periods shown: At or For the Year Ended June 30, 2014 One- to Four-Family Commercial Consumer Construction and Land Unallocated Total ALLL: (In thousands) Beginning balance $ 3,667 $ 1,774 $ 2,015 $ 297 $ 221 $ 7,974 Provision for loan losses 311 699 150 133 14 1,307 Charge-offs (662 ) (135 ) (615 ) (35 ) — (1,447 ) Recoveries 92 16 128 2 — 238 Ending balance $ 3,408 $ 2,354 $ 1,678 $ 397 $ 235 $ 8,072 Allowance by portfolio segment: Total ALLL $ 3,408 $ 2,354 $ 1,678 $ 397 $ 235 $ 8,072 General reserve 3,238 2,077 1,558 381 235 7,489 Specific reserve 170 277 120 16 — 583 Loans: Total loans $ 241,910 $ 190,660 $ 50,761 $ 20,497 $ — $ 503,828 General reserves (1) 234,300 184,895 49,843 20,057 — 489,095 Specific reserves (2) 7,610 5,765 918 440 — 14,733 (1) Loans collectively evaluated for impairment included in general reserves. (2) Loans individually evaluated for impairment included in specific reserves. At or For the Year Ended June 30, 2013 One- to Four-Family Commercial Consumer Construction and Land Unallocated Total ALLL: (In thousands) Beginning balance $ 3,464 $ 1,528 $ 2,168 $ 230 $ — $ 7,390 Provision for loan losses 571 (50 ) 345 289 221 1,376 Charge-offs (548 ) — (632 ) (222 ) — (1,402 ) Recoveries 180 296 134 — — 610 Ending balance $ 3,667 $ 1,774 $ 2,015 $ 297 $ 221 $ 7,974 Note 3 - Loans Receivable (continued) A loan is considered impaired when First Federal has determined that it may be unable to collect payments of principal or interest when due under the contractual terms of the loan. In the process of identifying loans as impaired, management takes into consideration factors that include payment history and status, collateral value, financial condition of the borrower, and the probability of collecting scheduled payments in the future. Minor payment delays and insignificant payment shortfalls typically do not result in a loan being classified as impaired. The significance of payment delays and shortfalls is considered by management on a case-by-case basis after taking into consideration the totality of circumstances surrounding the loans and the borrowers, including payment history and amounts of any payment shortfall, length and reason for delay, and likelihood of return to stable performance. Impairment is measured on a loan-by-loan basis for all loans in the portfolio except smaller balance homogeneous loans and certain qualifying TDR loans. The following table presents a summary of loans individually evaluated for impairment by portfolio segment at the dates indicated: June 30, 2015 2014 Recorded Less Charge-off) Unpaid Balance Related Allowance Recorded Unpaid Balance Related (In thousands) With no allowance recorded One- to four-family $ 3,502 $ 4,162 $ — $ 4,103 $ 4,720 $ — Commercial 858 1,099 — 977 1,032 — Consumer 209 332 — 383 579 — Construction and land 17 48 — 313 358 — Loans with no allowance recorded 4,586 5,641 — 5,776 6,689 — With an allowance recorded One- to four-family 3,904 4,157 161 3,507 4,113 170 Commercial 1,538 1,537 119 4,788 4,883 277 Consumer 590 622 131 535 557 120 Construction and land 142 166 18 127 151 16 Loans with an allowance recorded 6,174 6,482 429 8,957 9,704 583 Total One- to four-family 7,406 8,319 161 7,610 8,833 170 Commercial 2,396 2,636 119 5,765 5,915 277 Consumer 799 954 131 918 1,136 120 Construction and land 159 214 18 440 509 16 $ 10,760 $ 12,123 $ 429 $ 14,733 $ 16,393 $ 583 Note 3 - Loans Receivable (continued) The following tables present the average recorded investment in loans individually evaluated for impairment and the related interest income recognized for the periods shown: Year Ended June 30, 2015 2014 2013 Average Recorded Investment Interest Average Recorded Investment Interest Average Recorded Investment Interest (In thousands) With no allowance recorded One- to four-family $ 4,018 $ 162 $ 5,101 $ 173 $ 4,968 $ 151 Commercial 1,853 42 3,015 40 3,762 74 Consumer 221 10 601 18 486 28 Construction and land 237 4 61 12 166 — Loans with no allowance recorded 6,329 218 8,778 243 9,382 253 With an allowance recorded One- to four-family 3,223 227 3,780 206 5,034 133 Commercial 2,086 78 3,277 283 2,056 64 Consumer 694 36 786 26 1,157 38 Construction and land 185 14 226 16 248 28 Loans with an allowance recorded 6,188 355 8,069 531 8,495 263 Total One- to four-family 7,241 389 8,881 379 10,002 284 Commercial 3,939 120 6,292 323 5,818 138 Consumer 915 46 1,387 44 1,643 66 Construction and land 422 18 287 28 414 28 $ 12,517 $ 573 $ 16,847 $ 774 $ 17,877 $ 516 Interest income recognized on a cash basis on impaired loans for the years ended June 30, 2015 , 2014 and 2013 , was $473,000 , $594,000 , and $353,000 , respectively. Note 3 - Loans Receivable (continued) The following table presents the recorded investment in nonaccrual loans by class of loan at the dates indicated: June 30, 2015 2014 (In thousands) One- to four-family One- to four-family Olympic Peninsula 1 $ 3,839 $ 3,223 One- to four-family other 393 320 Commercial Commercial real estate 147 1,913 Consumer Home equity 181 340 Auto 10 — Consumer other 154 41 Construction and land Land and development 159 127 $ 4,883 $ 5,964 1 Olympic Peninsula is limited to properties located in the Washington State counties of Clallam and Jefferson in these tables. Note 3 - Loans Receivable (continued) Past due loans - Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. There were no loans past due 90 days or more and still accruing interest at June 30, 2015 and June 30, 2014 . The following table presents past due loans, net of partial loan charge-offs, by class, as of June 30, 2015 : 30-59 Past Due 60-89 Past Due 90 Days Past Due Total Past Due Current Total Loans (In thousands) One- to four-family One- to four-family Olympic Peninsula $ — $ 1,063 $ 704 $ 1,767 $ 166,560 $ 168,327 One- to four-family other — 167 — 167 88,202 88,369 Commercial Multi-family — — — — 33,086 33,086 Commercial real estate — — — — 125,623 125,623 Commercial business — — — 14,764 14,764 Consumer Home equity 81 15 98 194 36,193 36,387 Auto 36 50 10 96 3,844 3,940 Consumer other 22 39 — 61 4,197 4,258 Construction and land Construction — — — — 7,196 7,196 Land and development — 114 23 137 11,794 11,931 $ 139 $ 1,448 $ 835 $ 2,422 $ 491,459 $ 493,881 Note 3 - Loans Receivable (continued) The following table presents past due loans, net of partial loan charge-offs, by class, as of June 30, 2014 : 30-59 Past Due 60-89 Past Due 90 Days Past Due Total Past Due Current Total Loans (In thousands) One- to four-family One- to four-family Olympic Peninsula $ — $ 650 $ 1,181 $ 1,831 $ 166,079 $ 167,910 One- to four-family other — 319 — 319 73,681 74,000 Commercial Multi-family — — — — 45,100 45,100 Commercial real estate — — 98 98 127,930 128,028 Commercial business — — — — 17,532 17,532 Consumer Home equity 34 111 114 259 39,805 40,064 Auto 86 — — 86 5,532 5,618 Consumer other 42 60 — 102 4,977 5,079 Construction and land Construction — — — — 8,222 8,222 Land and development — 45 53 98 12,177 12,275 $ 162 $ 1,185 $ 1,446 $ 2,793 $ 501,035 $ 503,828 Note 3 - Loans Receivable (continued) Credit quality indicator - Federal regulations provide for the classification of lower quality loans and other assets, such as debt and equity securities, as substandard, doubtful, or loss; risk ratings 6, 7, and 8 in our 8-point risk rating system, respectively. An asset is considered substandard if it is inadequately protected by the current net worth and pay capacity of the borrower or of any collateral pledged. Substandard assets include those characterized by the distinct possibility that First Federal will sustain some loss if the deficiencies are not corrected. Assets classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values. Assets classified as loss are those considered uncollectible and of such little value that their continuance as assets without the establishment of a specific loss reserve is not warranted. When First Federal classifies problem assets as either substandard or doubtful, it may establish a specific allowance to address the risk specifically or First Federal may allow the loss to be addressed in the general allowance. General allowances represent loss allowances that have been established to recognize the inherent risk associated with lending activities but that, unlike specific allowances, have not been specifically allocated to particular problem assets. When an insured institution classifies problem assets as a loss, it is required to charge off such assets in the period in which they are deemed uncollectible. Assets that do not currently expose First Federal to sufficient risk to warrant classification as substandard or doubtful but possess identified weaknesses are designated as either watch or special mention assets; risk ratings 4 and 5 in our risk rating system, respectively. At June 30, 2015 and June 30, 2014 , First Federal had $9.9 million and $13.9 million , respectively, of loans classified as substandard and no loans classified as doubtful or loss. Loans not otherwise classified are considered pass graded loans and are rated 1-3 in our risk rating system. Additionally, First Federal categorizes loans as performing or nonperforming based on payment activity. Loans that are more than 90 days past due and nonaccrual loans are considered nonperforming. The following table represents the internally assigned grade as of June 30, 2015 , by class of loans: Pass Watch Special Mention Sub- Standard Total (In thousands) One- to four-family One- to four-family Olympic Peninsula $ 161,004 $ 1,524 $ 794 $ 5,005 $ 168,327 One- to four-family other 86,487 934 — 948 88,369 Commercial Multi-family 22,907 9,550 — 629 33,086 Commercial real estate 106,072 12,960 5,134 1,457 125,623 Commercial business 8,449 5,795 62 458 14,764 Consumer Home equity 34,969 501 86 831 36,387 Auto 3,716 105 58 61 3,940 Consumer other 3,906 108 19 225 4,258 Construction and land Construction 7,196 — — — 7,196 Land and development 11,230 351 113 237 11,931 $ 445,936 $ 31,828 $ 6,266 $ 9,851 $ 493,881 Note 3 - Loans Receivable (continued) The following table represents the internally assigned grade as of June 30, 2014 , by class of loans: Pass Watch Special Mention Sub- Standard Total (In thousands) One- to four-family One- to four-family Olympic Peninsula $ 156,484 $ 4,154 $ 2,114 $ 5,158 $ 167,910 One- to four-family other 72,809 203 605 383 74,000 Commercial Multi-family 39,879 4,337 — 884 45,100 Commercial real estate 111,319 9,471 1,570 5,668 128,028 Commercial business 10,369 6,514 — 649 17,532 Consumer Home equity 38,224 367 778 695 40,064 Auto 5,442 135 26 15 5,618 Consumer other 4,732 125 94 128 5,079 Construction and land Construction 8,025 197 — — 8,222 Land and development 11,341 524 47 363 12,275 $ 458,624 $ 26,027 $ 5,234 $ 13,943 $ 503,828 The following table represents the credit risk profile based on payment activity as of June 30, 2015 , by class of loans: Nonperforming Performing Total (In thousands) One- to four-family One- to four-family Olympic Peninsula $ 3,839 $ 164,488 $ 168,327 One- to four-family other 393 87,976 88,369 Commercial Multi-family — 33,086 33,086 Commercial real estate 147 125,476 125,623 Commercial business — 14,764 14,764 Consumer Home equity 181 36,206 36,387 Auto 10 3,930 3,940 Consumer other 154 4,104 4,258 Construction and land Construction — 7,196 7,196 Land and development 159 11,772 11,931 $ 4,883 $ 488,998 $ 493,881 Note 3 - Loans Receivable (continued) The following table represents the credit risk profile based on payment activity as of June 30, 2014 , by class of loans: Nonperforming Performing Total (In thousands) One- to four-family One- to four-family Olympic Peninsula $ 3,223 $ 164,687 $ 167,910 One- to four-family other 320 73,680 74,000 Commercial Multi-family 45,100 45,100 Commercial real estate 1,913 126,115 128,028 Commercial business — 17,532 17,532 Consumer Home equity 340 39,724 40,064 Auto — 5,618 5,618 Consumer other 41 5,038 5,079 Construction and land Construction — 8,222 8,222 Land and development 127 12,148 12,275 $ 5,964 $ 497,864 $ 503,828 Troubled debt restructuring - A TDR is a loan to a borrower who is experiencing financial difficulty that has been modified from its original terms and conditions in such a way that First Federal is granting the borrower a concession of some kind. First Federal has granted a variety of concessions to borrowers in the form of loan modifications. The modifications granted can generally be described in the following categories: Rate modification - A modification in which the interest rate is changed. Term modification - A modification in which the maturity date, timing of payments, or frequency of payments is changed. Payment modification - A modification in which the dollar amount of the payment is changed. Interest-only modifications in which a loan is converted to interest-only payments for a period of time are included in this category. Combination modification - Any other type of modification, including the use of multiple categories above. Upon identifying a receivable as a troubled debt restructuring, First Federal classifies the loan as impaired for purposes of determining the allowance for loan losses. This requires the loan to be evaluated individually for impairment, generally based on the expected cash flows under the new terms discounted at the loan’s original effective interest rates. For TDR loans that subsequently default, the method of determining impairment is generally the fair value of the collateral less estimated selling costs. Note 3 - Loans Receivable (continued) The following is a summary of information pertaining to TDR loans included in impaired loans at the dates indicated: June 30, 2015 2014 (In thousands) Total TDR loans $ 7,746 $ 12,164 Allowance for loan losses related to TDR loans $ 272 $ 363 Total nonaccrual TDR loans $ 5,676 $ 3,536 The following table presents newly restructured and renewals or modifications of existing TDR loans by class that occurred during the year ended June 30, 2015 , by type of concession granted: Number of Contracts Rate Modification Term Modification Combination Total Modifications (Dollars in thousands) Pre-modification outstanding recorded investment One- to four-family One- to four-family Olympic Peninsula 1 $ — $ 151 $ — $ 151 Commercial Commercial business 1 $ — $ 105 $ — $ 105 Consumer One- to four-family second mortgages 1 $ — $ 50 $ — $ 50 3 $ — $ 306 $ — $ 306 Post-modification outstanding recorded investment One- to four-family One- to four-family Olympic Peninsula 1 $ — $ 154 $ — $ 154 Commercial Commercial business 1 $ — $ 105 $ — $ 105 Consumer One- to four-family second mortgages 1 $ — $ 50 $ — $ 50 3 $ — $ 309 $ — $ 309 Renewals or modifications of existing TDR loans during the year ended June 30, 2015 , consisted of three recorded investments with pre-renewal balances totaling $306,000 and post-renewal balances of $309,000 . There were no TDR loans that were modified within the 12 months prior to June 30, 2015 , and for which there was a payment default during the year ended June 30, 2015 . Note 3 - Loans Receivable (continued) The following table presents newly restructured and renewals or modifications of existing TDR loans by class that occurred during the year ended June 30, 2014 , by type of concession granted: Number of Contracts Rate Modification Term Modification Combination Total Modifications (Dollars in thousands) Pre-modification outstanding recorded investment One- to four-family One- to four-family Olympic Peninsula 14 $ 950 $ — $ 1,493 $ 2,443 Commercial Multifamily 5 — — 610 610 Consumer Home equity 2 — 29 44 73 Consumer other 1 — — 1 1 22 $ 950 $ 29 $ 2,148 $ 3,127 Post-modification outstanding recorded investment One- to four-family One- to four-family Olympic Peninsula 14 $ 947 $ — $ 1,500 $ 2,447 Commercial Multifamily 1 — — 597 597 Consumer Home equity 2 — 29 44 73 Consumer other 1 — — 1 1 18 $ 947 $ 29 $ 2,142 $ 3,118 During the year ended June 30, 2014 , new TDR loans consisted of ten recorded investments with pre-modification balances totaling $1.9 million resulting in six post-modification investments with balances of $1.9 million . Renewals or modifications of existing TDR loans consisted of twelve recorded investments with pre-renewal balances totaling $1.2 million and post-renewal balances of $1.2 million . The following is a summary of TDR loans that were modified within the 12 months prior to June 30, 2014 , and for which there was a payment default during the year ended June 30, 2014 . Number of Contracts Rate Modification Term Modification Combination Total Modifications (Dollars in thousands) TDR loans that subsequently defaulted One- to four-family One- to four-family Olympic Peninsula 1 $ — $ — $ 229 $ 229 1 $ — $ — $ 229 $ 229 Note 3 - Loans Receivable (continued) The following table presents newly restructured and renewals or modifications of existing TDR loans by class that occurred during the year ended June 30, 2013 , by type of concession granted: Number of Contracts Rate Modification Term Modification Combination Total Modifications (Dollars in thousands) Pre-modification outstanding recorded investment One- to four-family One- to four-family Olympic Peninsula 15 $ 898 $ 515 $ 1,833 $ 3,246 One- to four-family other 1 — — 174 174 Commercial Commercial real estate 9 293 817 825 1,935 Commercial business 1 — 392 — 392 Consumer Home equity 9 71 54 206 331 35 $ 1,262 $ 1,778 $ 3,038 $ 6,078 Post-modification outstanding recorded investment One- to four-family One- to four-family Olympic Peninsula 15 $ 904 $ 519 $ 1,852 $ 3,275 One- to four-family other 1 $ — $ — $ 123 $ 123 Commercial Commercial real estate 7 293 817 844 1,954 Commercial business 1 — 392 — 392 Consumer Home equity 9 38 54 188 280 33 $ 1,235 $ 1,782 $ 3,007 $ 6,024 During the year ended June 30, 2013 , new TDR loans consisted of 24 recorded investments with pre-modification balances totaling $4.5 million resulting in 22 post-modification investments with balances of $4.5 million . Renewals or modifications of existing TDR loans consisted of 11 recorded investments with pre-renewal balances totaling $1.5 million and post-renewal balances of $1.5 million . The following is a summary of TDR loans that were modified within the 12 months prior to June 30, 2013 , and for which there was a payment default during the year ended June 30, 2013 . Number of Contracts Rate Modification Term Modification Combination Total Modifications (Dollars in thousands) TDR loans that subsequently defaulted One- to four-family One- to four-family Olympic Peninsula 2 $ — $ — $ 385 $ 385 Consumer Home equity 1 69 69 3 $ — $ — $ 454 $ 454 Note 3 - Loans Receivable (continued) No additional funds are committed to be advanced in connection with impaired loans at June 30, 2015 . The following table presents TDR loans by class at the dates indicated by accrual and nonaccrual status. June 30, 2015 June 30, 2014 Accrual Nonaccrual Total Accrual Nonaccrual Total (In thousands) One- to four-family One- to four-family Olympic Peninsula $ 1,563 $ 2,917 $ 4,480 $ 3,941 $ 1,529 $ 5,470 One- to four-family other 281 162 443 281 188 469 Commercial Multi-family — 629 629 728 — 728 Commercial real estate 147 1,216 1,363 2,742 1,714 4,456 Commercial business — 403 403 426 — 426 Consumer Home equity 79 349 428 510 105 615 $ 2,070 $ 5,676 $ 7,746 $ 8,628 $ 3,536 $ 12,164 TDR loans may be upgraded in their classification and placed on accrual status once there is a sustained period of repayment performance, usually six months or longer, and there is a reasonable assurance that repayment will continue. First Federal allows reclassification of a troubled debt restructuring back into the general loan pool (as a non-troubled debt restructuring) if the borrower is able to refinance the loan at then-current market rates and meet all of the underwriting criteria of First Federal required of other borrowers. The refinance must be based on the borrower’s ability to repay the debt and no special concessions of rate and/or term are granted to the borrower. |
