Loan Quality and Allowance for Loan Losses | 11. LOAN QUALITY AND ALLOWANCE FOR LOAN LOSSES Acquired Credit-Impaired Loans. At December 31, 2017, the remaining outstanding principal balance and carrying amount of acquired credit-impaired loans totaled approximately $592,000 and $388,000, 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 $365,000 and $371,000 at December 31, 2017 and June 30, 2017, respectively. There were no valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans at December 31, 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 December 31, 2017 and December 30, 2016. Three Months Ended December 31, 2017 2016 (In Thousands) Beginning balance $ 206 $ 314 Accretion to interest income - (2 ) Disposals - - Reclassifications from nonaccretable difference - - Ending balance $ 206 $ 312 Six Months Ended December 31, 2017 2016 (In Thousands) Beginning balance $ 215 $ 335 Accretion to interest income (9 ) (4 ) Disposals - (19 ) Reclassifications from nonaccretable difference - - Ending balance $ 206 $ 312 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 December 31, 2017, we held four single-family properties in real estate owned with an aggregate carrying value of $1.6 million that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 12 residential mortgage loans with aggregate carrying values totaling $2.3 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 December 31, 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 and six months ended December 31, 2017 and December 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 December 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 37 - 4 - 2 - - 43 Loans collectively evaluated for impairment 2,403 13,909 9,661 246 2,704 457 643 30,023 Total allowance for loan losses $ 2,440 $ 13,909 $ 9,665 $ 246 $ 2,706 $ 457 $ 643 $ 30,066 Allowance for Loan Losses and Loans Receivable At December 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 $ 106 $ - $ - $ - $ 282 $ - $ - $ 388 Loans individually evaluated for impairment 7,983 135 7,205 - 2,569 1,556 - 19,448 Loans collectively evaluated for impairment 566,233 1,438,251 1,062,049 22,205 89,591 79,405 11,947 3,269,681 Total loans $ 574,322 $ 1,438,386 $ 1,069,254 $ 22,205 $ 92,442 $ 80,961 $ 11,947 $ 3,289,517 Unamortized yield adjustments 1,999 Loans receivable, net of yield adjustments $ 3,291,516 Allowance for Loan Losses and Loans Receivable Period Ended December 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 December 31, 2017: At September 30, 2017: $ 2,501 $ 13,807 $ 9,893 $ 89 $ 1,948 $ 470 $ 737 $ 29,445 Total charge offs (143 ) - - - - - (263 ) (406 ) Total recoveries 57 - - - - - 34 91 Total provisions 25 102 (228 ) 157 758 (13 ) 135 936 Total allowance for loan losses $ 2,440 $ 13,909 $ 9,665 $ 246 $ 2,706 $ 457 $ 643 $ 30,066 Allowance for Loan Losses and Loans Receivable Period Ended December 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 six months ended December 31, 2017: At June 30, 2017: $ 2,384 $ 13,941 $ 9,939 $ 35 $ 1,709 $ 501 $ 777 $ 29,286 Total charge offs (410 ) - (38 ) - (6 ) - (560 ) (1,014 ) Total recoveries 77 - - - 34 65 52 228 Total provisions 389 (32 ) (236 ) 211 969 (109 ) 374 1,566 Total allowance for loan losses $ 2,440 $ 13,909 $ 9,665 $ 246 $ 2,706 $ 457 $ 643 $ 30,066 Allowance for Loan Losses and Loans Receivable Period Ended December 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 December 31, 2016: At September 30, 2016: $ 2,806 $ 10,269 $ 8,316 $ 39 $ 2,319 $ 534 $ 720 $ 25,003 Total charge offs (41 ) - (37 ) - - (74 ) (241 ) (393 ) Total recoveries 182 - - - 1 1 11 195 Total provisions (517 ) 1,957 76 (10 ) (541 ) 95 195 1,255 Total allowance for loan losses $ 2,430 $ 12,226 $ 8,355 $ 29 $ 1,779 $ 556 $ 685 $ 26,060 Allowance for Loan Losses and Loans Receivable Period Ended December 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 six months ended December 31, 2016: At June 30, 2016: $ 2,370 $ 9,995 $ 7,846 $ 24 $ 2,784 $ 432 $ 778 $ 24,229 Total charge offs (64 ) - (78 ) - (194 ) (95 ) (336 ) (767 ) Total recoveries 182 - - - 16 1 15 214 Total provisions (58 ) 2,231 587 5 (827 ) 218 228 2,384 Total allowance for loan losses $ 2,430 $ 12,226 $ 8,355 $ 29 $ 1,779 $ 556 $ 685 $ 26,060 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 December 31, 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 December 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 563,388 $ 1,438,251 $ 1,058,926 $ 21,902 $ 84,839 $ 78,771 $ 11,841 $ 3,257,918 Classified: Special Mention 607 - - 303 1,137 112 72 2,231 Substandard 10,327 135 10,328 - 6,466 2,078 32 29,366 Doubtful - - - - - - 2 2 Loss - - - - - - - - Total classified loans 10,934 135 10,328 303 7,603 2,190 106 31,599 Total loans $ 574,322 $ 1,438,386 $ 1,069,254 $ 22,205 $ 92,442 $ 80,961 $ 11,947 $ 3,289,517 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 December 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 568,948 $ 1,438,386 $ 1,063,235 $ 22,205 $ 90,293 $ 80,537 $ 11,752 $ 3,275,356 Past due: 30-59 days 2,190 - 2,226 - 255 134 96 4,901 60-89 days 312 - 137 - 2 8 68 527 90+ days 2,872 - 3,656 - 1,892 282 31 8,733 Total past due 5,374 - 6,019 - 2,149 424 195 14,161 Total loans $ 574,322 $ 1,438,386 $ 1,069,254 $ 22,205 $ 92,442 $ 80,961 $ 11,947 $ 3,289,517 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 December 31, 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 December 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 568,953 $ 1,438,251 $ 1,062,196 $ 22,205 $ 89,616 $ 80,034 $ 11,916 $ 3,273,171 Nonperforming: 90+ days past due accruing - - - - - - 31 31 Nonaccrual 5,369 135 7,058 - 2,826 927 - 16,315 Total nonperforming 5,369 135 7,058 - 2,826 927 31 16,346 Total loans $ 574,322 $ 1,438,386 $ 1,069,254 $ 22,205 $ 92,442 $ 80,961 $ 11,947 $ 3,289,517 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 December 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 $ 566,233 $ 1,438,251 $ 1,062,049 $ 22,205 $ 89,591 $ 79,405 $ 11,947 $ 3,269,681 Impaired loans: Impaired loans with no allowance for impairment 7,772 135 6,863 - 2,849 1,556 - 19,175 Impaired loans with allowance for impairment: Recorded investment 317 - 342 - 2 - - 661 Allowance for impairment (37 ) - (4 ) - (2 ) - - (43 ) Balance of impaired loans net of allowance for impairment 280 - 338 - - - - 618 Total impaired loans, excluding allowance for impairment: 8,089 135 7,205 - 2,851 1,556 - 19,836 Total loans $ 574,322 $ 1,438,386 $ 1,069,254 $ 22,205 $ 92,442 $ 80,961 $ 11,947 $ 3,289,517 Unpaid principal balance of impaired loans: Total impaired loans $ 12,656 $ 930 $ 10,549 $ 106 $ 6,777 $ 2,528 $ - $ 33,546 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 December 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 December 31, 2017: Average balance of impaired loans $ 8,860 $ 141 $ 7,254 $ 63 $ 2,865 $ 1,579 $ - $ 20,762 Interest earned on impaired loans $ 31 $ - $ 2 $ - $ 1 $ 7 $ - $ 41 For the six months ended December 31, 2017: Average balance of impaired loans $ 9,441 $ 146 $ 6,755 $ 196 $ 2,836 $ 1,747 $ - $ 21,121 Interest earned on impaired loans $ 66 $ - $ 4 $ - $ 2 $ 15 $ - $ 87 For the three months ended December 31, 2016: Average balance of impaired loans $ 13,262 $ 187 $ 6,263 $ 282 $ 3,225 $ 2,072 $ - $ 25,291 Interest earned on impaired loans $ 28 $ - $ 7 $ - $ 2 $ 10 $ - $ 47 For the six months ended December 31, 2016: Average balance of impaired loans $ 13,140 $ 193 $ 6,515 $ 313 $ 3,166 $ 2,117 $ - $ 25,444 Interest earned on impaired loans $ 49 $ - $ 19 $ - $ 6 $ 24 $ - $ 98 The following table presents information regarding the restructuring of the Company’s troubled debts during the three months ended December 31, 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 December 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 three months ended December 31, 2017: Number of loans 1 - 1 - - - - 2 Pre-modification outstanding recorded investment $ 24 $ - $ 179 $ - $ - $ - $ - $ 203 Post-modification outstanding recorded investment 47 - 201 - - - - 248 Charge offs against the allowance for loan loss recognized at modification 87 - - - - - - 87 Troubled debt restructuring defaults for the three months ended December 31, 2017: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Period Ended December 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 six months ended December 31, 2017: Number of loans 2 - 1 - - - - 3 Pre-modification outstanding recorded investment $ 449 $ - $ 179 $ - $ - $ - $ - $ 628 Post-modification outstanding recorded investment 414 - 201 - - - - 615 Charge offs against the allowance for loan loss recognized at modification 87 - - - - - - 87 Troubled debt restructuring defaults for the six months ended December 31, 2017: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Period Ended December 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 December 31, 2016: Number of loans 1 - - - - 1 - 2 Pre-modification outstanding recorded investment $ 197 $ - $ - $ - $ - $ 87 $ - $ 284 Post-modification outstanding recorded investment 186 - - - - 95 - 281 Charge offs against the allowance for loan loss recognized at modification 14 - - - - 9 - 23 Troubled debt restructuring defaults for the three months ended December 31, 2016: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Period Ended December 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 six months ended December 31, 2016: 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 six months ended December 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 |