Loan Quality and Allowance for Loan Losses | 11. LOAN QUALITY AND ALLOWANCE FOR LOAN LOSSES Acquired Credit-Impaired Loans. At March 31, 2018, the remaining outstanding principal balance and carrying amount of acquired credit-impaired loans totaled approximately $589,000 and $378,000, 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 $355,000 and $371,000 at March 31, 2018 and June 30, 2017, respectively. There were no valuation allowances for specifically identified impairment attributable to acquired credit-impaired loans at March 31, 2018 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 and nine months ended March 31, 2018 and March 31, 2017. Three Months Ended March 31, 2018 2017 (In Thousands) Beginning balance $ 206 $ 312 Accretion to interest income - (97 ) Disposals - - Reclassifications from nonaccretable difference - - Ending balance $ 206 $ 215 Nine Months Ended March 31, 2018 2017 (In Thousands) Beginning balance $ 215 $ 335 Accretion to interest income (9 ) (101 ) Disposals - (19 ) Reclassifications from nonaccretable difference - - Ending balance $ 206 $ 215 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, 2018, we held three single-family properties in real estate owned with an aggregate carrying value of $1.1 million that were acquired through foreclosures on residential mortgage loans. As of that same date, we held ten residential mortgage loans with aggregate carrying values totaling $1.9 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 March 31, 2018 and June 30, 2017 based upon the calculation methodology as described in the Company’s Annual Report on 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 and nine months ended March 31, 2018 and March 31, 2017. 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, 2018 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 83 - - - 50 - - 133 Loans collectively evaluated for impairment 2,371 14,010 9,885 253 2,636 433 527 30,115 Total allowance for loan losses $ 2,454 $ 14,010 $ 9,885 $ 253 $ 2,686 $ 433 $ 527 $ 30,248 Allowance for Loan Losses and Loans Receivable At March 31, 2018 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 $ 103 $ - $ - $ - $ 275 $ - $ - $ 378 Loans individually evaluated for impairment 7,901 127 7,711 - 2,403 1,582 - 19,724 Loans collectively evaluated for impairment 555,803 1,471,446 1,105,674 22,963 85,538 77,940 10,224 3,329,588 Total loans $ 563,807 $ 1,471,573 $ 1,113,385 $ 22,963 $ 88,216 $ 79,522 $ 10,224 $ 3,349,690 Unamortized yield adjustments 1,679 Loans receivable, net of yield adjustments $ 3,351,369 Allowance for Loan Losses and Loans Receivable Three Months Ended March 31, 2018 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, 2018: At December 31, 2017: $ 2,440 $ 13,909 $ 9,665 $ 246 $ 2,706 $ 457 $ 643 $ 30,066 Total charge offs (61 ) - (7 ) - (89 ) (1 ) (167 ) (325 ) Total recoveries - - - - 55 - 29 84 Total provisions 75 101 227 7 14 (23 ) 22 423 Total allowance for loan losses $ 2,454 $ 14,010 $ 9,885 $ 253 $ 2,686 $ 433 $ 527 $ 30,248 Allowance for Loan Losses and Loans Receivable Nine Months Ended March 31, 2018 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, 2018: At June 30, 2017: $ 2,384 $ 13,941 $ 9,939 $ 35 $ 1,709 $ 501 $ 777 $ 29,286 Total charge offs (471 ) - (45 ) - (95 ) (1 ) (727 ) (1,339 ) Total recoveries 77 - - - 89 65 81 312 Total provisions 464 69 (9 ) 218 983 (132 ) 396 1,989 Total allowance for loan losses $ 2,454 $ 14,010 $ 9,885 $ 253 $ 2,686 $ 433 $ 527 $ 30,248 Allowance for Loan Losses and Loans Receivable Three Months 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 Nine Months 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 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 March 31, 2018 and June 30, 2017 based upon the methodology for identifying and reporting such loans as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2017. Credit-Rating Classification of Loans Receivable At March 31, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 554,182 $ 1,471,446 $ 1,105,097 $ 22,716 $ 81,916 $ 77,590 $ 10,125 $ 3,323,072 Classified: Special Mention 498 - - 247 13 28 50 836 Substandard 9,127 127 8,288 - 6,287 1,904 47 25,780 Doubtful - - - - - - 2 2 Loss - - - - - - - - Total classified loans 9,625 127 8,288 247 6,300 1,932 99 26,618 Total loans $ 563,807 $ 1,471,573 $ 1,113,385 $ 22,963 $ 88,216 $ 79,522 $ 10,224 $ 3,349,690 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 March 31, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 561,018 $ 1,471,573 $ 1,111,850 $ 22,963 $ 86,284 $ 79,201 $ 10,093 $ 3,342,982 Past due: 30-59 days 977 - 679 - 57 60 38 1,811 60-89 days 24 - - - 100 - 48 172 90+ days 1,788 - 856 - 1,775 261 45 4,725 Total past due 2,789 - 1,535 - 1,932 321 131 6,708 Total loans $ 563,807 $ 1,471,573 $ 1,113,385 $ 22,963 $ 88,216 $ 79,522 $ 10,224 $ 3,349,690 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 March 31, 2018 and June 30, 2017 based upon the methodology for identifying and reporting such loans as described in the Company’s Annual Report on 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 March 31, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 558,652 $ 1,471,446 $ 1,108,013 $ 22,963 $ 85,562 $ 78,640 $ 10,179 $ 3,335,455 Nonperforming: 90+ days past due accruing - - - - - - 45 45 Nonaccrual 5,155 127 5,372 - 2,654 882 - 14,190 Total nonperforming 5,155 127 5,372 - 2,654 882 45 14,235 Total loans $ 563,807 $ 1,471,573 $ 1,113,385 $ 22,963 $ 88,216 $ 79,522 $ 10,224 $ 3,349,690 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 March 31, 2018 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 $ 555,803 $ 1,471,446 $ 1,105,674 $ 22,963 $ 85,538 $ 77,940 $ 10,224 $ 3,329,588 Impaired loans: Impaired loans with no allowance for impairment 7,260 127 7,711 - 2,578 1,582 - 19,258 Impaired loans with allowance for impairment: Recorded investment 744 - - - 100 - - 844 Allowance for impairment (83 ) - - - (50 ) - - (133 ) Balance of impaired loans net of allowance for impairment 661 - - - 50 - - 711 Total impaired loans, excluding allowance for impairment: 8,004 127 7,711 - 2,678 1,582 - 20,102 Total loans $ 563,807 $ 1,471,573 $ 1,113,385 $ 22,963 $ 88,216 $ 79,522 $ 10,224 $ 3,349,690 Unpaid principal balance of impaired loans: Total impaired loans $ 12,678 $ 930 $ 14,049 $ 106 $ 6,506 $ 2,613 $ - $ 36,882 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 Three and Nine Months Ended March 31, 2018 and 2017 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, 2018: Average balance of impaired loans $ 8,048 $ 130 $ 7,038 $ - $ 2,762 $ 1,563 $ - $ 19,541 Interest earned on impaired loans $ 33 $ - $ - $ - $ 1 $ 9 $ - $ 43 For the nine months ended March 31, 2018: Average balance of impaired loans $ 9,019 $ 141 $ 6,823 $ 137 $ 2,805 $ 1,693 $ - $ 20,618 Interest earned on impaired loans $ 99 $ - $ 4 $ - $ 4 $ 24 $ - $ 131 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 The following table presents information regarding the restructuring of the Company’s troubled debts during the nine months ended March 31, 2018 and the nine months ended March 31, 2017, and any defaults during those periods of troubled debt restructurings (“TDRs”) that were restructured within 12 months of the date of default. Troubled Debt Restructurings of Loans Receivable Nine Months Ended March 31, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (Dollars in Thousands) Troubled debt restructuring activity for the nine months ended March 31, 2018: Number of loans 5 - 2 - - 1 - 8 Pre-modification outstanding recorded investment $ 1,521 $ - $ 315 $ - $ - $ 72 $ - $ 1,908 Post-modification outstanding recorded investment 1,813 - 330 - - 71 - 2,214 Charge offs against the allowance for loan loss recognized at modification 145 - 7 - - 1 - 153 Troubled debt restructuring defaults for the nine months ended March 31, 2018: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Nine Months Ended March 31, 2017 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (Dollars 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 $ - $ - $ - $ - $ - $ - $ - $ - 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 |