| Loans Receivable | Note 3 - Loans Receivable Loans receivable at September 30, 2015 and December 31, 2014 are summarized as follows: September 30, 2015 December 31, 2014 (In Thousands) Mortgage loans: Residential real estate: One- to four-family $ 394,308 411,979 Multi-family 526,276 522,281 Home equity 26,035 29,207 Construction and land 16,336 17,081 Commercial real estate 113,294 94,771 Consumer 383 200 Commercial loans 24,009 19,471 $ 1,100,641 1,094,990 The Company provides several types of loans to its customers, including residential, construction, commercial and consumer loans. Significant loan concentrations are considered to exist for a financial institution when there are amounts loaned to one borrower or to multiple borrowers engaged in similar activities that would cause them to be similarly impacted by economic or other conditions. While credit risks are geographically concentrated in the Company's Milwaukee metropolitan area, there are no concentrations with individual or groups of related borrowers. Qualifying loans receivable totaling $853.7 million and $844.2 million at September 30, 2015 and December 31, 2014, respectively, are pledged as collateral against $350.0 million in outstanding Federal Home Loan Bank of Chicago advances under a blanket security agreement. As of September 30, 2015 and December 31, 2014, there were no loans 90 or more days past due and still accruing interest. An analysis of past due loans receivable as of September 30, 2015 and December 31, 2014 follows: As of September 30, 2015 1-59 Days Past Due (1) 60-89 Days Past Due (2) 90 Days or Greater Total Past Due Current (3) Total Loans (In Thousands) Mortgage loans: Residential real estate: One- to four-family $ 1,726 456 8,346 10,528 383,780 394,308 Multi-family 797 - 3,497 4,294 521,982 526,276 Home equity 64 99 144 307 25,728 26,035 Construction and land - - 304 304 16,032 16,336 Commercial real estate 148 - 77 225 113,069 113,294 Consumer - - - - 383 383 Commercial loans 4 - - 4 24,005 24,009 Total $ 2,739 555 12,368 15,662 1,084,979 1,100,641 As of December 31, 2014 1-59 Days Past Due (1) 60-89 Days Past Due (2) 90 Days or Greater Total Past Due Current (3) Total Loans (In Thousands) Mortgage loans: Residential real estate: One- to four-family $ 3,767 3,743 12,196 19,706 392,273 411,979 Multi-family 462 280 11,092 11,834 510,447 522,281 Home equity 268 153 250 671 28,536 29,207 Construction and land 90 - 362 452 16,629 17,081 Commercial real estate 225 - 947 1,172 93,599 94,771 Consumer - - - - 200 200 Commercial loans 34 - 265 299 19,172 19,471 Total $ 4,846 4,176 25,112 34,134 1,060,856 1,094,990 (1) Includes $1.1 million and $1.6 million at September 30, 2015 and December 31, 2014, respectively, which are on non-accrual status. (2) Includes $386,000 and $795,000 at September 30, 2015 and December 31, 2014, respectively, which are on non-accrual status. (3) Includes $8.0 million and $10.5 million at September 30, 2015 and December 31, 2014, respectively, which are on non-accrual status. A summary of the activity for the nine months ended September 30, 2015 and 2014 in the allowance for loan losses follows: One- to Four- Family Multi-Family Home Equity Construction and Land Commercial Real Estate Consumer Commercial Total (In Thousands) Nine months ended September 30, 2015 Balance at beginning of period $ 9,877 5,358 422 687 1,951 8 403 18,706 Provision (credit) for loan losses 1,032 615 (5 ) 157 (204 ) (2 ) 127 1,720 Charge-offs (3,212 ) (1,501 ) (72 ) (84 ) (45 ) - - (4,914 ) Recoveries 436 789 101 45 40 5 - 1,416 Balance at end of period $ 8,133 5,261 446 805 1,742 11 530 16,928 Nine months ended September 30, 2014 Balance at beginning of period $ 11,549 7,211 1,807 1,613 1,402 34 648 24,264 Provision (credit) for loan losses (1,540 ) 2,897 (1,098 ) 29 476 (26 ) 112 850 Charge-offs (1,900 ) (3,462 ) (191 ) (418 ) (186 ) (5 ) (293 ) (6,455 ) Recoveries 1,652 23 11 63 23 5 3 1,780 Balance at end of period $ 9,761 6,669 529 1,287 1,715 8 470 20,439 A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of September 30, 2015 follows: One- to Four- Family Multi- Family Home Equity Construction and Land Commercial Real Estate Consumer Commercial Total (In Thousands) Allowance related to loans individually evaluated for impairment $ 1,146 637 116 9 158 - 4 2,070 Allowance related to loans collectively evaluated for impairment 6,987 4,624 330 796 1,584 11 526 14,858 Balance at end of period $ 8,133 5,261 446 805 1,742 11 530 16,928 Loans individually evaluated for impairment $ 20,874 7,580 413 1,986 2,436 - 31 33,320 Loans collectively evaluated for impairment 373,434 518,696 25,622 14,350 110,858 383 23,978 1,067,321 Total gross loans $ 394,308 526,276 26,035 16,336 113,294 383 24,009 1,100,641 A summary of the allowance for loan loss for loans evaluated individually and collectively for impairment by collateral class as of December 31, 2014 follows: One- to Four- Family Multi- Family Home Equity Construction and Land Commercial Real Estate Consumer Commercial Total (In Thousands) Allowance related to loans individually evaluated for impairment $ 2,386 731 63 13 526 - 7 3,726 Allowance related to loans collectively evaluated for impairment 7,491 4,627 359 674 1,425 8 396 14,980 Balance at end of period $ 9,877 5,358 422 687 1,951 8 403 18,706 Loans individually evaluated for impairment $ 29,509 15,562 589 2,266 3,077 - 299 51,302 Loans collectively evaluated for impairment 382,470 506,719 28,618 14,815 91,694 200 19,172 1,043,688 Total gross loans $ 411,979 522,281 29,207 17,081 94,771 200 19,471 1,094,990 The following table presents information relating to the Company's internal risk ratings of its loans receivable as of September 30, 2015 and December 31, 2014: One- to Four- Family Multi-Family Home Equity Construction and Land Commercial Real Estate Consumer Commercial Total (In Thousands) At September 30, 2015 Substandard $ 21,921 5,411 594 1,986 2,436 - 31 32,379 Watch 7,902 4,578 284 975 2,301 - 1,867 17,907 Pass 364,485 516,287 25,157 13,375 108,557 383 22,111 1,050,355 $ 394,308 526,276 26,035 16,336 113,294 383 24,009 1,100,641 At December 31, 2014 Substandard $ 28,945 12,638 624 2,266 3,077 - 299 47,849 Watch 10,779 7,070 278 1,377 2,186 - 840 22,530 Pass 372,255 502,573 28,305 13,438 89,508 200 18,332 1,024,611 $ 411,979 522,281 29,207 17,081 94,771 200 19,471 1,094,990 Factors that are important to managing overall credit quality include sound loan underwriting and administration, systematic monitoring of existing loans and commitments, effective loan review on an ongoing basis, early identification of potential problems, an allowance for loan losses, and sound non-accrual and charge-off policies. Our underwriting policies require an officers' loan committee to review and approve all loans in excess of $500,000. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, we maintain an independent loan review system under which our credit management personnel review non-owner occupied one- to four-family, multi-family, construction and land, commercial real estate and commercial loans that individually, or as part of an overall borrower relationship, exceed $1.0 million in potential exposure. Loans meeting these criteria are reviewed on an annual basis, or more frequently if the loan renewal is less than one year. With respect to loans subject to the annual review, the review process is contingent on the receipt of updated financial information from the borrower. To the extent that updated information is not received on a timely basis, the review is deferred and the credit is monitored until such time as the updated financial information is obtained. With respect to this review process, management has determined that pass loans include loans that exhibit acceptable financial statements, cash flow and leverage. Watch loans have potential weaknesses that deserve management's attention and, if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the credit. Substandard loans are considered inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These loans generally have a well-defined weakness that may jeopardize liquidation of the debt and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Finally, a loan is considered to be impaired when it is probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan agreement. Management has determined that all non-accrual loans and loans modified under troubled debt restructurings meet the definition of an impaired loan. The Company's procedures dictate that an updated valuation must be obtained with respect to underlying collateral at the time a loan is deemed impaired. Updated valuations may also be obtained upon transfer from loans receivable to real estate owned based upon the age of the prior appraisal, changes in market conditions or known changes to the physical condition of the property. Estimated fair values are reduced to account for sales commissions, broker fees, unpaid property taxes and additional selling expenses to arrive at an estimated net realizable value. The adjustment factor is based upon the Company's actual experience with respect to sales of real estate owned over the prior two years. An additional adjustment factor is applied by appraisal vintage to account for downward market pressure since the date of appraisal. The additional adjustment factor is based upon relevant sales data available for our general operating market as well as company-specific historical net realizable values as compared to the most recent appraisal prior to disposition. With respect to multi-family income-producing real estate, appraisals are reviewed and estimated collateral values are adjusted by updating significant appraisal assumptions to reflect current real estate market conditions. Significant assumptions reviewed and updated include the capitalization rate, rental income and operating expenses. These adjusted assumptions are based upon recent appraisals received on similar properties as well as on actual experience related to real estate owned and currently under Company management. The following tables present data on impaired loans at September 30, 2015 and December 31, 2014. As of or for the Nine Months Ended September 30, 2015 Recorded Investment Unpaid Principal Reserve Cumulative Charge-Offs Average Recorded Investment Interest Paid (In Thousands) Total Impaired with Reserve One- to four-family $ 5,842 6,025 1,146 183 6,011 216 Multi-family 2,098 2,200 637 102 2,176 30 Home equity 172 172 116 - 175 8 Construction and land 212 362 9 150 245 - Commercial real estate 1,130 1,539 158 409 100 44 Consumer - - - - - - Commercial 4 4 4 - 6 1 9,458 10,302 2,070 844 8,713 299 Total Impaired with no Reserve One- to four-family 15,032 18,659 - 3,627 16,316 471 Multi-family 5,482 7,483 - 2,001 5,585 197 Home equity 241 255 - 14 244 5 Construction and land 1,774 1,774 - - 1,912 51 Commercial real estate 1,306 1,306 - - 1,306 48 Consumer - - - - - - Commercial 27 27 - - 31 1 23,862 29,504 - 5,642 25,394 773 Total Impaired One- to four-family 20,874 24,684 1,146 3,810 22,327 687 Multi-family 7,580 9,683 637 2,103 7,761 227 Home equity 413 427 116 14 419 13 Construction and land 1,986 2,136 9 150 2,157 51 Commercial real estate 2,436 2,845 158 409 1,406 92 Consumer - - - - - - Commercial 31 31 4 - 37 2 $ 33,320 39,806 2,070 6,486 34,107 1,072 As of or for the Year Ended December 31, 2014 Recorded Investment Unpaid Principal Reserve Cumulative Charge-Offs Average Recorded Investment Interest Paid (In Thousands) Total Impaired with Reserve One- to four-family $ 11,864 13,345 2,386 1,481 15,982 515 Multi-family 7,438 10,285 731 2,847 12,720 177 Home equity 144 144 63 - 195 7 Construction and land 47 61 13 14 63 - Commercial real estate 2,984 3,544 526 560 4,211 128 Consumer - - - - - - Commercial 7 7 7 - 12 1 22,484 27,386 3,726 4,902 33,183 828 Total Impaired with no Reserve One- to four-family 17,645 19,795 - 2,150 23,215 860 Multi-family 8,124 9,364 - 1,240 12,693 439 Home equity 445 445 - - 554 15 Construction and land 2,219 2,332 - 113 3,379 97 Commercial real estate 93 93 - - 126 4 Consumer - - - - - - Commercial 292 535 - 243 470 2 28,818 32,564 - 3,746 40,437 1,417 Total Impaired One- to four-family 29,509 33,140 2,386 3,631 39,197 1,375 Multi-family 15,562 19,649 731 4,087 25,413 616 Home equity 589 589 63 - 749 22 Construction and land 2,266 2,393 13 127 3,442 97 Commercial real estate 3,077 3,637 526 560 4,337 132 Consumer - - - - - - Commercial 299 542 7 243 482 3 $ 51,302 59,950 3,726 8,648 73,620 2,245 The difference between a loan's recorded investment and the unpaid principal balance represents a partial charge-off resulting from a confirmed loss when the value of the collateral securing the loan is below the loan balance and management's assessment that the full collection of the loan balance is not likely. When a loan is considered impaired, interest payments received are treated as interest income on a cash basis as long as the remaining book value of the loan (i.e., after charge-off of all identified losses) is deemed to be fully collectible. If the remaining book value is not deemed to be fully collectible, all payments received are applied to unpaid principal. Determination as to the ultimate collectability of the remaining book value is supported by an updated credit department evaluation of the borrower's financial condition and prospects for repayment, including consideration of the borrower's sustained historical repayment performance and other relevant factors. The determination as to whether an allowance is required with respect to impaired loans is based upon an analysis of the value of the underlying collateral and/or the borrower's intent and ability to make all principal and interest payments in accordance with contractual terms. The evaluation process is subject to the use of significant estimates and actual results could differ from estimates. This analysis is primarily based upon third party appraisals and/or a discounted cash flow analysis. In those cases in which no allowance has been provided for an impaired loan, the Company has determined that the estimated value of the underlying collateral exceeds the remaining outstanding balance of the loan. Of the total $23.9 million of impaired loans as of September 30, 2015 for which no allowance has been provided, $5.6 million in charge-offs have been recorded to reduce the unpaid principal balance to an amount that is commensurate with the loans' net realizable value, using the estimated fair value of the underlying collateral. To the extent that further deterioration in property values continues, the Company may have to reevaluate the sufficiency of the collateral servicing these impaired loans resulting in additional provisions to the allowance for loans losses or charge-offs. At September 30, 2015, total impaired loans includes $17.9 million of troubled debt restructurings. Troubled debt restructurings involve granting concessions to a borrower experiencing financial difficulty by modifying the terms of the loan in an effort to avoid foreclosure. The vast majority of debt restructurings include a modification of terms to allow for an interest only payment and/or reduction in interest rate. The restructured terms are typically in place for six to twelve months. At December 31, 2014, total impaired loans included $26.1 million of troubled debt restructurings. The following presents data on troubled debt restructurings: As of September 30, 2015 Accruing Non-accruing Total Amount Number Amount Number Amount Number (dollars in thousands) One- to four-family $ 3,905 4 $ 5,810 45 $ 9,715 49 Multi-family 2,795 2 2,300 7 5,095 9 Home equity - - 98 1 98 1 Construction and land 1,636 2 - - 1,636 2 Commercial real estate 1,306 1 77 1 1,383 2 $ 9,642 9 $ 8,285 54 $ 17,927 63 As of December 31, 2014 Accruing Non-accruing Total Amount Number Amount Number Amount Number (dollars in thousands) One- to four-family $ 4,724 8 $ 10,233 55 $ 14,957 63 Multi-family 2,923 2 4,797 7 7,720 9 Home equity - - 98 1 98 1 Construction and land 1,866 2 - - 1,866 2 Commercial real estate 1,306 1 170 1 1,476 2 $ 10,819 13 $ 15,298 64 $ 26,117 77 At September 30, 2015, $17.9 million in loans had been modified in troubled debt restructurings and $8.3 million of these loans were included in the non-accrual loan total. The remaining $9.6 million, while meeting the internal requirements for modification in a troubled debt restructuring, were current with respect to payments under their original loan terms at the time of the restructuring and thus, continued to be included with accruing loans. Provided these loans perform in accordance with the modified terms, they will continue to be accounted for on an accrual basis. All loans that have been modified in a troubled debt restructuring are considered to be impaired. As such, an analysis has been performed with respect to all of these loans to determine the need for a valuation reserve. When a loan is expected to perform in accordance with the restructured terms and ultimately return to and perform under contract terms, a valuation allowance is established for an amount equal to the excess of the present value of the expected future cash flows under the original contract terms as compared with the modified terms, including an estimated default rate. When there is doubt as to the borrower's ability to perform under the restructured terms or ultimately return to and perform under market terms, a valuation allowance is established equal to the impairment when the carrying amount exceeds fair value of the underlying collateral. As a result of the impairment analysis, a $1.0 million valuation allowance has been established as of September 30, 2015 with respect to the $17.9 million in troubled debt restructurings. As of December 31, 2014, a $1.5 million valuation allowance had been established with respect to the $26.1 million in troubled debt restructurings. After a troubled debt restructuring reverts to market terms, a minimum of six consecutive contractual payments must be received prior to consideration for a return to accrual status. If an updated credit department review indicates no other evidence of elevated credit risk, the loan is returned to accrual status at that time. The following presents troubled debt restructurings by concession type: As of September 30, 2015 Performing in accordance with modified terms In Default Total Amount Number Amount Number Amount Number (dollars in thousands) Interest reduction and principal forbearance $ 15,031 34 $ 77 1 $ 15,108 35 Principal forbearance 339 2 - - 339 2 Interest reduction 2,480 26 - - 2,480 26 $ 17,850 62 $ 77 1 $ 17,927 63 As of December 31, 2014 Performing in accordance with modified terms In Default Total Amount Number Amount Number Amount Number (dollars in thousands) Interest reduction and principal forbearance $ 15,306 36 $ 2,014 7 $ 17,320 43 Principal forbearance 490 3 2,632 1 3,122 4 Interest reduction 4,875 11 800 19 5,675 30 $ 20,671 50 $ 5,446 27 $ 26,117 77 The following presents data on troubled debt restructurings: For the three months ended September 30, 2015 For the three months ended September 30, 2014 Amount Number Amount Number (dollars in thousands) Loans modified as a troubled debt restructure One- to four-family $ 117 2 $ 166 2 Multi family 799 2 520 3 Commercial real estate - - 1,306 1 $ 916 4 $ 1,992 6 There were no troubled debt restructurings within the past twelve months for which there was a default during the three months ended September 30, 2015 or September 30, 2014. The following presents data on troubled debt restructurings: For the nine months ended September 30, 2015 For the nine months ended September 30, 2014 Amount Number Amount Number (dollars in thousands) Loans modified as a troubled debt restructure One- to four-family $ 188 3 $ 3,938 15 Multi family 799 2 1,117 5 Home equity - - 98 1 Commercial real estate - - 1,306 1 $ 987 5 $ 6,459 22 There were no troubled debt restructurings within the past twelve months for which there was a default during the nine months ended September 30, 2015 or September 30, 2014. The following table presents data on non-accrual loans as of September 30, 2015 and December 31, 2014: September 30, 2015 December 31, 2014 (Dollars in Thousands) Non-accrual loans: Residential One- to four-family $ 16,051 23,918 Multi-family 4,785 12,001 Home equity 313 445 Construction and land 350 401 Commercial real estate 321 947 Commercial 31 299 Consumer - - Total non-accrual loans $ 21,851 38,011 Total non-accrual loans to total loans receivable 1.99 % 3.47 % Total non-accrual loans to total assets 1.25 % 2.13 % |
