Loan Quality and Allowance for Loan Losses | 10. LOAN QUALITY AND ALLOWANCE FOR LOAN LOSSES Acquired Credit-Impaired Loans. At March 31, 2017, the remaining outstanding principal balance and carrying amount of acquired credit-impaired loans totaled approximately $1,041,000 and $803,000, respectively. By comparison, at June 30, 2016, the remaining outstanding principal balance and carrying amount of acquired credit-impaired loans totaled approximately $1,605,000 and $1,168,000, respectively. The carrying amount of acquired credit-impaired loans for which interest is not being recognized due to the uncertainty of the cash flows relating to such loans totaled $380,000 and $436,000 at March 31, 2017 and June 30, 2016, respectively. The balance of the allowance for loan losses at June 30, 2016 included approximately $13,000 of valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans. The valuation allowances were attributable to additional impairment recognized on the applicable loans subsequent to their acquisition, net of any charge offs recognized during that time. There were no valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans at March 31, 2017. The following table presents the changes in the accretable yield relating to the acquired credit-impaired loans for the three and nine months ended March 31, 2017 and March 31, 2016. Three Months Ended March 31, 2017 2016 (In Thousands) Beginning balance $ 312 $ 844 Accretion to interest income (97 ) (81 ) Disposals - - Reclassifications from nonaccretable difference - - Ending balance $ 215 $ 763 Nine Months Ended March 31, 2017 2016 (In Thousands) Beginning balance $ 335 $ 1,189 Accretion to interest income (101 ) (400 ) Disposals (19 ) (26 ) Reclassifications from nonaccretable difference - - Ending balance $ 215 $ 763 Residential Mortgage Loans in Foreclosure. We may obtain physical possession of one- to four-family real estate collateralizing a residential mortgage loan via foreclosure or through an in-substance repossession. As of March 31, 2017, we held two single-family properties in real estate owned with an aggregate carrying value of $797,000 that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 21 residential mortgage loans with aggregate carrying values totaling $4.8 million which were in the process of foreclosure. Loan Quality. The following tables present the balance of the allowance for loan losses at March 31, 2017 and June 30, 2016 based upon the calculation methodology as described in the Company’s Form 10-K for the fiscal year ended June 30, 2016. The tables identify the valuation allowances attributable to specifically identified impairments on individually evaluated loans, including those acquired with deteriorated credit quality, as well as valuation allowances for impairments on loans evaluated collectively. The tables include the underlying balance of loans receivable applicable to each category as of those dates as well as the activity in the allowance for loan losses for the three months and nine months ended March 31, 2017 and March 31, 2016. Unless otherwise noted, the balance of loans reported in the tables below excludes yield adjustments and the allowance for loan loss. Allowance for Loan Losses and Loans Receivable at March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Balance of allowance for loan losses: Loans acquired with deteriorated credit quality $ - $ - $ - $ - $ - $ - $ - $ - Loans individually evaluated for impairment 36 - 13 - - 58 - 107 Loans collectively evaluated for impairment 2,329 13,286 8,854 9 1,740 475 814 27,507 Total allowance for loan losses $ 2,365 $ 13,286 $ 8,867 $ 9 $ 1,740 $ 533 $ 814 $ 27,614 Allowance for Loan Losses and Loans Receivable at March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Balance of loans receivable: Loans acquired with deteriorated credit quality $ 97 $ - $ - $ - $ 706 $ - $ - $ 803 Loans individually evaluated for impairment 12,752 173 5,829 602 2,386 2,038 - 23,780 Loans collectively evaluated for impairment 553,816 1,371,166 989,953 892 80,662 80,374 18,173 3,095,036 Total loans $ 566,665 $ 1,371,339 $ 995,782 $ 1,494 $ 83,754 $ 82,412 $ 18,173 $ 3,119,619 Unamortized yield adjustments 3,009 Loans receivable, net of yield adjustments $ 3,122,628 Allowance for Loan Losses and Loans Receivable Period ended March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Changes in the allowance for loan losses for the three months ended March 31, 2017: At December 31, 2016: $ 2,430 $ 12,226 $ 8,355 $ 29 $ 1,779 $ 556 $ 685 $ 26,060 Total charge offs (5 ) - - - (28 ) - (285 ) (318 ) Total recoveries 21 - - - 1 15 26 63 Total provisions (81 ) 1,060 512 (20 ) (12 ) (38 ) 388 1,809 Total allowance for loan losses $ 2,365 $ 13,286 $ 8,867 $ 9 $ 1,740 $ 533 $ 814 $ 27,614 Allowance for Loan Losses and Loans Receivable Period ended March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Changes in the allowance for loan losses for the nine months ended March 31, 2017: At June 30, 2016 $ 2,370 $ 9,995 $ 7,846 $ 24 $ 2,784 $ 432 $ 778 $ 24,229 Total charge offs (69 ) - (78 ) - (221 ) (95 ) (621 ) (1,084 ) Total recoveries 202 - - - 17 16 41 276 Total provisions (138 ) 3,291 1,099 (15 ) (840 ) 180 616 4,193 Total allowance for loan losses $ 2,365 $ 13,286 $ 8,867 $ 9 $ 1,740 $ 533 $ 814 $ 27,614 Allowance for Loan Losses and Loans Receivable Period ended March 31, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Changes in the allowance for loan losses for the three months ended March 31, 2016: At December 31, 2015: $ 2,398 $ 8,513 $ 6,939 $ 35 $ 1,941 $ 401 $ 287 $ 20,514 Total charge offs (27 ) - (18 ) - (43 ) (4 ) (1 ) (93 ) Total recoveries - - - - - - - - Total provisions (30 ) 1,248 602 2 410 1 356 2,589 Total allowance for loan losses $ 2,341 $ 9,761 $ 7,523 $ 37 $ 2,308 $ 398 $ 642 $ 23,010 Allowance for Loan Losses and Loans Receivable Period ended March 31, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Changes in the allowance for loan losses for the nine months ended March 31, 2016: At June 30, 2015 $ 2,210 $ 6,354 $ 4,766 $ 34 $ 1,860 $ 366 $ 16 $ 15,606 Total charge offs (1,180 ) - (115 ) - (687 ) (64 ) (4 ) (2,050 ) Total recoveries 9 - - - 759 41 1 810 Total provisions 1,302 3,407 2,872 3 376 55 629 8,644 Total allowance for loan losses $ 2,341 $ 9,761 $ 7,523 $ 37 $ 2,308 $ 398 $ 642 $ 23,010 Allowance for Loan Losses and Loans Receivable at June 30, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Balance of allowance for loan losses: Loans acquired with deteriorated credit quality $ - $ - $ - $ - $ 13 $ - $ - $ 13 Loans individually evaluated for impairment 77 - 53 - 387 78 - 595 Loans collectively evaluated for impairment 2,293 9,995 7,793 24 2,384 354 778 23,621 Total allowance for loan losses $ 2,370 $ 9,995 $ 7,846 $ 24 $ 2,784 $ 432 $ 778 $ 24,229 Allowance for Loan Losses and Loans Receivable at June 30, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Balance of loans receivable: Loans acquired with deteriorated credit quality $ 104 $ - $ 304 $ - $ 760 $ - $ - 1,168 Loans individually evaluated for impairment 12,806 205 6,773 357 1,647 2,180 - 23,968 Loans collectively evaluated for impairment 592,293 1,040,088 813,596 1,681 85,800 87,386 25,401 2,646,245 Total loans $ 605,203 $ 1,040,293 $ 820,673 $ 2,038 $ 88,207 $ 89,566 $ 25,401 $ 2,671,381 Unamortized yield adjustments 2,606 Loans receivable, net of yield adjustments $ 2,673,987 The following tables present key indicators of credit quality regarding the Company’s loan portfolio based upon loan classification and contractual payment status at March 31, 2017 and June 30, 2016 based upon the methodology for identifying and reporting such loans as described in the Company’s Form 10-K for the fiscal year ended June 30, 2016. Credit-Rating Classification of Loans Receivable at March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 550,067 $ 1,371,166 $ 988,585 $ 576 $ 75,881 $ 79,614 $ 18,032 $ 3,083,921 Classified: Special Mention 939 - - 316 1,151 387 73 2,866 Substandard 15,659 173 7,197 602 6,722 2,411 66 32,830 Doubtful - - - - - - 2 2 Loss - - - - - - - - Total classified loans 16,598 173 7,197 918 7,873 2,798 141 35,698 Total loans $ 566,665 $ 1,371,339 $ 995,782 $ 1,494 $ 83,754 $ 82,412 $ 18,173 $ 3,119,619 Credit-Rating Classification of Loans Receivable at June 30, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 588,992 $ 1,040,088 $ 811,621 $ 1,063 $ 81,902 $ 86,835 $ 25,298 $ 2,635,799 Classified: Special Mention 859 - - 618 681 309 61 2,528 Substandard 15,352 205 9,052 357 5,624 2,422 40 33,052 Doubtful - - - - - - 2 2 Loss - - - - - - - - Total classified loans 16,211 205 9,052 975 6,305 2,731 103 35,582 Total loans $ 605,203 $ 1,040,293 $ 820,673 $ 2,038 $ 88,207 $ 89,566 $ 25,401 $ 2,671,381 Contractual Payment Status of Loans Receivable at March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 558,698 $ 1,371,339 $ 994,071 $ 1,237 $ 81,720 $ 81,660 $ 17,974 $ 3,106,699 Past due: 30-59 days 257 - 390 - 333 572 64 1,616 60-89 days 514 - 102 - 57 - 70 743 90+ days 7,196 - 1,219 257 1,644 180 65 10,561 Total past due 7,967 - 1,711 257 2,034 752 199 12,920 Total loans $ 566,665 $ 1,371,339 $ 995,782 $ 1,494 $ 83,754 $ 82,412 $ 18,173 $ 3,119,619 Contractual Payment Status of Loans Receivable at June 30, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 596,548 $ 1,040,293 $ 817,539 $ 1,681 $ 87,328 $ 88,657 $ 25,301 $ 2,657,347 Past due: 30-59 days 1,524 - - - - 503 22 2,049 60-89 days 940 - 376 - 411 75 40 1,842 90+ days 6,191 - 2,758 357 468 331 38 10,143 Total past due 8,655 - 3,134 357 879 909 100 14,034 Total loans $ 605,203 $ 1,040,293 $ 820,673 $ 2,038 $ 88,207 $ 89,566 $ 25,401 $ 2,671,381 The following tables present information relating to the Company’s nonperforming and impaired loans at March 31, 2017 and June 30, 2016 based upon the methodology for identifying and reporting such loans as described in the Company’s Form 10-K for the fiscal year ended June 30, 2016. Loans reported as “90+ days past due accruing” in the table immediately below are also reported in the preceding contractual payment status table under the heading “90+ days past due”. Performance Status of Loans Receivable at March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 555,717 $ 1,371,166 $ 990,118 $ 1,237 $ 81,092 $ 81,166 $ 18,108 $ 3,098,604 Nonperforming: 90+ days past due accruing - - - - - - 65 65 Nonaccrual 10,948 173 5,664 257 2,662 1,246 - 20,950 Total nonperforming 10,948 173 5,664 257 2,662 1,246 65 21,015 Total loans $ 566,665 $ 1,371,339 $ 995,782 $ 1,494 $ 83,754 $ 82,412 $ 18,173 $ 3,119,619 Performance Status of Loans Receivable at June 30, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 594,471 $ 1,040,088 $ 814,085 $ 1,681 $ 86,242 $ 88,396 $ 25,363 $ 2,650,326 Nonperforming: 90+ days past due accruing - - - - - - 38 38 Nonaccrual 10,732 205 6,588 357 1,965 1,170 - 21,017 Total nonperforming 10,732 205 6,588 357 1,965 1,170 38 21,055 Total loans $ 605,203 $ 1,040,293 $ 820,673 $ 2,038 $ 88,207 $ 89,566 $ 25,401 $ 2,671,381 Impairment Status of Loans Receivable at March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Carrying value of impaired loans: Non-impaired loans $ 553,816 $ 1,371,166 $ 989,953 $ 892 $ 80,662 $ 80,374 $ 18,173 $ 3,095,036 Impaired loans: Impaired loans with no allowance for impairment 12,617 173 5,613 602 3,092 1,941 - 24,038 Impaired loans with allowance for impairment: Recorded investment 232 - 216 - - 97 - 545 Allowance for impairment (36 ) - (13 ) - - (58 ) - (107 ) Balance of impaired loans net of allowance for impairment 196 - 203 - - 39 - 438 Total impaired loans, excluding allowance for impairment: 12,849 173 5,829 602 3,092 2,038 - 24,583 Total loans $ 566,665 $ 1,371,339 $ 995,782 $ 1,494 $ 83,754 $ 82,412 $ 18,173 $ 3,119,619 Unpaid principal balance of impaired loans: Total impaired loans $ 19,342 $ 930 $ 10,631 $ 691 $ 6,712 $ 3,141 $ - $ 41,447 Impairment Status of Loans Receivable at June 30, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Carrying value of impaired loans: Non-impaired loans $ 592,293 $ 1,040,088 $ 813,596 $ 1,681 $ 85,800 $ 87,386 $ 25,401 $ 2,646,245 Impaired loans: Impaired loans with no allowance for impairment 10,876 205 6,473 357 1,900 2,101 21,912 Impaired loans with allowance for impairment: Recorded investment 2,034 - 604 507 79 3,224 Allowance for impairment (77 ) - (53 ) (400 ) (78 ) (608 ) Balance of impaired loans net of allowance for impairment 1,957 - 551 - 107 1 - 2,616 Total impaired loans, excluding allowance for impairment: 12,910 205 7,077 357 2,407 2,180 - 25,136 Total loans $ 605,203 $ 1,040,293 $ 820,673 $ 2,038 $ 88,207 $ 89,566 $ 25,401 $ 2,671,381 Unpaid principal balance of impaired loans: Total impaired loans $ 16,571 $ 849 $ 8,269 $ 458 $ 3,736 $ 2,505 $ - $ 32,388 Impairment Status of Loans Receivable Period ended March 31, 2017 and 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) For the three months ended March 31, 2017: Average balance of impaired loans $ 12,933 $ 176 $ 6,066 $ 518 $ 3,134 $ 2,037 $ - $ 24,864 Interest earned on impaired loans $ 25 $ - $ - $ 3 $ 3 $ 10 $ - $ 41 For the nine months ended March 31, 2017: Average balance of impaired loans $ 13,055 $ 187 $ 6,372 $ 400 $ 3,154 $ 2,093 $ - $ 25,261 Interest earned on impaired loans $ 74 $ - $ - $ 3 $ 9 $ 34 $ - $ 120 For the three months ended March 31, 2016: Average balance of impaired loans $ 12,827 $ 295 $ 7,703 $ 387 $ 8,793 $ 2,341 $ - $ 32,346 Interest earned on impaired loans $ 45 $ - $ 8 $ - $ 182 $ 14 $ - $ 249 For the nine months ended March 31, 2016: Average balance of impaired loans $ 11,926 $ 352 $ 7,659 $ 1,046 $ 9,438 $ 2,417 $ - $ 32,838 Interest earned on impaired loans $ 156 $ - $ 27 $ - $ 573 $ 43 $ - $ 799 The following table presents information regarding the restructuring of the Company’s troubled debts during the nine months ended March 31, 2017 and the three and nine months ended March 31, 2016 and any defaults during those periods of TDRs that were restructured within 12 months of the date of default. The Company did not restructure any troubled debts during the three month period ended March 31, 2017. Troubled Debt Restructurings of Loans Receivable Period ended March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Troubled debt restructuring activity for the nine months ended March 31, 2017: Number of loans 1 - 1 - - 2 - 4 Pre-modification outstanding recorded investment $ 197 $ - $ 244 $ - $ - $ 271 $ - $ 712 Post-modification outstanding recorded investment 186 - 223 - - 279 - 688 Charge offs against the allowance for loan loss recognized at modification 14 - 27 - - 12 - 53 Troubled debt restructuring defaults for the nine months ended March 31, 2017: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Period ended March 31, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Troubled debt restructuring activity for the three months ended March 31, 2016: Number of loans 2 - - - - 1 - 3 Pre-modification outstanding recorded investment $ 673 $ - $ - $ - $ - $ 41 $ - $ 714 Post-modification outstanding recorded investment 687 - - - - 37 - 724 Charge offs against the allowance for loan loss recognized at modification 8 - - - - 4 - 12 Troubled debt restructuring defaults for the three months ended March 31, 2016: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Period ended March 31, 2016 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Troubled debt restructuring activity for the nine months ended March 31, 2016: Number of loans 5 - 3 - - 3 - 11 Pre-modification outstanding recorded investment $ 1,770 $ - $ 2,285 $ - $ - $ 151 $ - $ 4,206 Post-modification outstanding recorded investment 1,472 - 2,290 - - 124 - 3,886 Charge offs against the allowance for loan loss recognized at modification 300 - - - - 28 - 328 Troubled debt restructuring defaults for the nine months ended March 31, 2016: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - The manner in which the terms of a loan are modified through a troubled debt restructuring generally includes one or more of the following changes to the loan’s repayment terms: • Interest Rate Reduction • Capitalization of Prior Past Dues • Extension of Maturity or Balloon Date • Deferral of Principal Payments: • Payment Recalculation and Re-amortization |