Loan Quality and Allowance for Loan Losses | 9. LOAN QUALITY AND ALLOWANCE FOR LOAN LOSSES Acquired Credit-Impaired Loans. At September 30, 2017, the remaining outstanding principal balance and carrying amount of acquired credit-impaired loans totaled approximately $584,000 and $386,000, respectively. By comparison, at June 30, 2017, the remaining outstanding principal balance and carrying amount of acquired credit-impaired loans totaled approximately $839,000 and $594,000, 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 $363,000 and $371,000 at September 30, 2017 and June 30, 2017, respectively. There were no valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans at September 30, 2017 and June 30, 2017, respectively. The following table presents the changes in the accretable yield relating to the acquired credit-impaired loans for the three months ended September 30, 2017 and September 30, 2016. Three Months Ended September 30, 2017 2016 (In Thousands) Beginning balance $ 215 $ 335 Accretion to interest income (9 ) (2 ) Disposals - (19 ) Reclassifications from nonaccretable difference - - Ending balance $ 206 $ 314 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 September 30, 2017, we held five single-family properties in real estate owned with an aggregate carrying value of $1.9 million that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 13 residential mortgage loans with aggregate carrying values totaling $2.6 million which were in the process of foreclosure. By comparison, as of June 30, 2017, we held two single-family properties in real estate owned with an aggregate carrying value of $981,000 that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 18 residential mortgage loans with aggregate carrying values totaling $3.7 million which were in the process of foreclosure. Loan Quality. The following tables present the balance of the allowance for loan losses at September 30, 2017 and June 30, 2017 based upon the calculation methodology as described in the Company’s Form 10-K for the fiscal year ended June 30, 2017. 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 ended September 30, 2017 and September 30, 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 September 30, 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 72 - 6 - - - - 78 Loans collectively evaluated for impairment 2,429 13,807 9,887 89 1,948 470 737 29,367 Total allowance for loan losses $ 2,501 $ 13,807 $ 9,893 $ 89 $ 1,948 $ 470 $ 737 $ 29,445 Allowance for Loan Losses and Loans Receivable At September 30, 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 $ - $ - $ - $ 289 $ - $ - $ 386 Loans individually evaluated for impairment 9,177 146 7,307 253 2,590 1,726 - 21,199 Loans collectively evaluated for impairment 550,319 1,427,694 1,078,676 8,067 78,797 79,020 13,788 3,236,361 Total loans $ 559,593 $ 1,427,840 $ 1,085,983 $ 8,320 $ 81,676 $ 80,746 $ 13,788 $ 3,257,946 Unamortized yield adjustments 2,382 Loans receivable, net of yield adjustments $ 3,260,328 Allowance for Loan Losses and Loans Receivable Period Ended September 30, 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 September 30, 2017: At June 30, 2017: $ 2,384 $ 13,941 $ 9,939 $ 35 $ 1,709 $ 501 $ 777 $ 29,286 Total charge offs (267 ) - (38 ) - (6 ) - (297 ) (608 ) Total recoveries 20 - - - 34 65 18 137 Total provisions 364 (134 ) (8 ) 54 211 (96 ) 239 630 Total allowance for loan losses $ 2,501 $ 13,807 $ 9,893 $ 89 $ 1,948 $ 470 $ 737 $ 29,445 Allowance for Loan Losses and Loans Receivable Period Ended September 30, 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 September 30, 2016: At June 30, 2016: $ 2,370 $ 9,995 $ 7,846 $ 24 $ 2,784 $ 432 $ 778 $ 24,229 Total charge offs (23 ) - (41 ) - (194 ) (21 ) (95 ) (374 ) Total recoveries - - - - 15 - 4 19 Total provisions 459 274 511 15 (286 ) 123 33 1,129 Total allowance for loan losses $ 2,806 $ 10,269 $ 8,316 $ 39 $ 2,319 $ 534 $ 720 $ 25,003 Allowance for Loan Losses and Loans Receivable At June 30, 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 154 - 39 - 6 - 199 Loans collectively evaluated for impairment 2,230 13,941 9,900 35 1,703 501 777 29,087 Total allowance for loan losses $ 2,384 $ 13,941 $ 9,939 $ 35 $ 1,709 $ 501 $ 777 $ 29,286 Allowance for Loan Losses and Loans Receivable At June 30, 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 $ - $ - $ - $ 497 $ - $ - 594 Loans individually evaluated for impairment 10,546 158 5,877 612 2,365 1,894 - 21,452 Loans collectively evaluated for impairment 556,680 1,412,417 1,079,187 3,203 71,609 80,928 16,383 3,220,407 Total loans $ 567,323 $ 1,412,575 $ 1,085,064 $ 3,815 $ 74,471 $ 82,822 $ 16,383 $ 3,242,453 Unamortized yield adjustments 2,808 Loans receivable, net of yield adjustments $ 3,245,261 The following tables present key indicators of credit quality regarding the Company’s loan portfolio based upon loan classification and contractual payment status at September 30, 2017 and June 30, 2017 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, 2017. Credit-Rating Classification of Loans Receivable At September 30, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 546,574 $ 1,427,694 $ 1,074,962 $ 7,761 $ 74,095 $ 78,472 $ 13,578 $ 3,223,136 Classified: Special Mention 817 - - 306 1,082 120 103 2,428 Substandard 12,202 146 11,021 253 6,499 2,154 105 32,380 Doubtful - - - - - - 2 2 Loss - - - - - - - - Total classified loans 13,019 146 11,021 559 7,581 2,274 210 34,810 Total loans $ 559,593 $ 1,427,840 $ 1,085,983 $ 8,320 $ 81,676 $ 80,746 $ 13,788 $ 3,257,946 Credit-Rating Classification of Loans Receivable At June 30, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 552,961 $ 1,412,417 $ 1,078,711 $ 2,894 $ 66,886 $ 80,393 $ 16,166 $ 3,210,428 Classified: Special Mention 928 - - 309 1,098 120 139 2,594 Substandard 13,434 158 6,353 612 6,487 2,309 75 29,428 Doubtful - - - - - - 3 3 Loss - - - - - - - - Total classified loans 14,362 158 6,353 921 7,585 2,429 217 32,025 Total loans $ 567,323 $ 1,412,575 $ 1,085,064 $ 3,815 $ 74,471 $ 82,822 $ 16,383 $ 3,242,453 Contractual Payment Status of Loans Receivable At September 30, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 554,765 $ 1,427,840 $ 1,082,128 $ 8,067 $ 79,782 $ 80,207 $ 13,525 $ 3,246,314 Past due: 30-59 days 151 - 51 253 - 113 60 628 60-89 days 349 - - - 37 - 98 484 90+ days 4,328 - 3,804 - 1,857 426 105 10,520 Total past due 4,828 - 3,855 253 1,894 539 263 11,632 Total loans $ 559,593 $ 1,427,840 $ 1,085,983 $ 8,320 $ 81,676 $ 80,746 $ 13,788 $ 3,257,946 Contractual Payment Status of Loans Receivable At June 30, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 560,054 $ 1,412,575 $ 1,083,736 $ 3,560 $ 72,826 $ 81,946 $ 16,083 $ 3,230,780 Past due: 30-59 days 1,749 - 60 255 29 187 91 2,371 60-89 days 403 - 318 - - 141 135 997 90+ days 5,117 - 950 - 1,616 548 74 8,305 Total past due 7,269 - 1,328 255 1,645 876 300 11,673 Total loans $ 567,323 $ 1,412,575 $ 1,085,064 $ 3,815 $ 74,471 $ 82,822 $ 16,383 $ 3,242,453 The following tables present information relating to the Company’s nonperforming and impaired loans at September 30, 2017 and June 30, 2017 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, 2017. 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 September 30, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 553,078 $ 1,427,694 $ 1,078,829 $ 8,067 $ 78,823 $ 79,661 $ 13,683 $ 3,239,835 Nonperforming: 90+ days past due accruing - - - - - - 105 105 Nonaccrual 6,515 146 7,154 253 2,853 1,085 - 18,006 Total nonperforming 6,515 146 7,154 253 2,853 1,085 105 18,111 Total loans $ 559,593 $ 1,427,840 $ 1,085,983 $ 8,320 $ 81,676 $ 80,746 $ 13,788 $ 3,257,946 Performance Status of Loans Receivable At June 30, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 558,533 $ 1,412,417 $ 1,079,344 $ 3,560 $ 71,837 $ 81,581 $ 16,309 $ 3,223,581 Nonperforming: 90+ days past due accruing - - - - - - 74 74 Nonaccrual 8,790 158 5,720 255 2,634 1,241 - 18,798 Total nonperforming 8,790 158 5,720 255 2,634 1,241 74 18,872 Total loans $ 567,323 $ 1,412,575 $ 1,085,064 $ 3,815 $ 74,471 $ 82,822 $ 16,383 $ 3,242,453 Impairment Status of Loans Receivable At September 30, 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 $ 550,319 $ 1,427,694 $ 1,078,676 $ 8,067 $ 78,797 $ 79,020 $ 13,788 $ 3,236,361 Impaired loans: Impaired loans with no allowance for impairment 7,869 146 6,960 253 2,878 1,726 - 19,832 Impaired loans with allowance for impairment: Recorded investment 1,405 - 347 - 1 - - 1,753 Allowance for impairment (72 ) - (6 ) - - - - (78 ) Balance of impaired loans net of allowance for impairment 1,333 - 341 - 1 - - 1,675 Total impaired loans, excluding allowance for impairment: 9,274 146 7,307 253 2,879 1,726 - 21,585 Total loans $ 559,593 $ 1,427,840 $ 1,085,983 $ 8,320 $ 81,676 $ 80,746 $ 13,788 $ 3,257,946 Unpaid principal balance of impaired loans: Total impaired loans $ 14,112 $ 930 $ 10,549 $ 691 $ 6,777 $ 2,828 $ - $ 35,887 Impairment Status of Loans Receivable At June 30, 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 $ 556,680 $ 1,412,417 $ 1,079,187 $ 3,203 $ 71,609 $ 80,928 $ 16,383 $ 3,220,407 Impaired loans: Impaired loans with no allowance for impairment 8,971 158 4,521 612 2,755 1,894 - 18,911 Impaired loans with allowance for impairment: Recorded investment 1,672 - 1,356 - 107 - - 3,135 Allowance for impairment (154 ) - (39 ) - (6 ) - - (199 ) Balance of impaired loans net of allowance for impairment 1,518 - 1,317 - 101 - - 2,936 Total impaired loans, excluding allowance for impairment: 10,643 158 5,877 612 2,862 1,894 - 22,046 Total loans $ 567,323 $ 1,412,575 $ 1,085,064 $ 3,815 $ 74,471 $ 82,822 $ 16,383 $ 3,242,453 Unpaid principal balance of impaired loans: Total impaired loans $ 16,479 $ 930 $ 10,002 $ 691 $ 6,682 $ 2,961 $ - $ 37,745 Impairment Status of Loans Receivable Periods Ended September 30, 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 September 30, 2017: Average balance of impaired loans $ 9,981 $ 152 $ 6,395 $ 343 $ 2,818 $ 1,911 $ - $ 21,600 Interest earned on impaired loans $ 35 $ - $ 2 $ - $ 1 $ 8 $ - $ 46 For the three months ended September 30, 2016: Average balance of impaired loans $ 13,058 $ 199 $ 6,752 $ 354 $ 3,131 $ 2,156 $ - $ 25,650 Interest earned on impaired loans $ 31 $ - $ 12 $ - $ 4 $ 15 $ - $ 62 The following table presents information regarding the restructuring of the Company’s troubled debts during the three months ended September 30, 2017 and 2016 and any defaults during those periods of TDRs that were restructured within 12 months of the date of default. Troubled Debt Restructurings of Loans Receivable Period Ended September 30, 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 three months ended September 30, 2017: Number of loans 1 - - - - - - 1 Pre-modification outstanding recorded investment $ 425 $ - $ - $ - $ - $ - $ - $ 425 Post-modification outstanding recorded investment 367 - - - - - - 367 Charge offs against the allowance for loan loss recognized at modification - - - - - - - - Troubled debt restructuring defaults for the three months ended September 30, 2017: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Period Ended September 30, 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 September 30, 2016: Number of loans - - - - 1 1 - 2 Pre-modification outstanding recorded investment $ - $ - $ - $ - $ 244 $ 184 $ - $ 428 Post-modification outstanding recorded investment - - - - 223 184 - 407 Charge offs against the allowance for loan loss recognized at modification - - - - 27 3 - 30 Troubled debt restructuring defaults for the three months ended September 30, 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 |