Loan Quality and Allowance for Loan Losses | 11. LOAN QUALITY AND ALLOWANCE FOR LOAN LOSSES 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, 2018, we held two single-family properties in other real estate owned with an aggregate carrying value of $508,000 that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 17 residential mortgage loans with aggregate carrying values totaling $3.2 million which were in the process of foreclosure. By comparison, as of June 30, 2018, we held four single-family properties in other real estate owned with an aggregate carrying value of $725,000 that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 14 residential mortgage loans with aggregate carrying values totaling $2.3 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, 2018 and June 30, 2018 based upon the calculation methodology as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018. 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 six months ended December 31, 2018 and December 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 At December 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 41 - - - 311 - - 352 Loans collectively evaluated for impairment 2,936 17,095 9,918 305 2,203 464 253 33,174 Total allowance for loan losses $ 2,977 $ 17,095 $ 9,918 $ 305 $ 2,514 $ 464 $ 253 $ 33,526 Balance of Loans Receivable At December 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 $ 90 $ - $ - $ - $ 257 $ - $ - $ 347 Loans individually evaluated for impairment 13,856 89 7,993 - 2,067 1,558 - 25,563 Loans collectively evaluated for impairment 1,320,338 1,974,320 1,294,590 28,405 67,735 94,443 6,834 4,786,665 Total loans $ 1,334,284 $ 1,974,409 $ 1,302,583 $ 28,405 $ 70,059 $ 96,001 $ 6,834 $ 4,812,575 Unaccreted yield adjustments (59,183 ) Loans receivable, net of yield adjustments $ 4,753,392 Allowance for Loan Losses Three Months Ended December 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 December 31, 2018: At September 30, 2018: $ 2,594 $ 16,317 $ 9,945 $ 293 $ 2,803 $ 434 $ 345 $ 32,731 Total charge offs (1 ) - - - (166 ) - (32 ) (199 ) Total recoveries - - 1 - - - 22 23 Total provisions 384 778 (28 ) 12 (123 ) 30 (82 ) 971 Total allowance for loan losses $ 2,977 $ 17,095 $ 9,918 $ 305 $ 2,514 $ 464 $ 253 $ 33,526 Allowance for Loan Losses Six Months Ended December 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 six months ended December 31, 2018: At June 30, 2018: $ 2,479 $ 14,946 $ 9,787 $ 258 $ 2,552 $ 430 $ 413 $ 30,865 Total charge offs (83 ) - (54 ) - (185 ) - (139 ) (461 ) Total recoveries - - 2 - - - 49 51 Total provisions 581 2,149 183 47 147 34 (70 ) 3,071 Total allowance for loan losses $ 2,977 $ 17,095 $ 9,918 $ 305 $ 2,514 $ 464 $ 253 $ 33,526 Allowance for Loan Losses Three Months 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 Six Months 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 At June 30, 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 79 - - - 227 - - 306 Loans collectively evaluated for impairment 2,400 14,946 9,787 258 2,325 430 413 30,559 Total allowance for loan losses $ 2,479 $ 14,946 $ 9,787 $ 258 $ 2,552 $ 430 $ 413 $ 30,865 Balance of Loans Receivable At June 30, 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 $ 99 $ - $ - $ - $ 269 $ - $ - 368 Loans individually evaluated for impairment 11,931 116 5,344 - 3,921 1,601 - 22,913 Loans collectively evaluated for impairment 1,285,423 1,758,468 1,297,617 23,271 81,635 89,160 9,060 4,544,634 Total loans $ 1,297,453 $ 1,758,584 $ 1,302,961 $ 23,271 $ 85,825 $ 90,761 $ 9,060 $ 4,567,915 Unaccreted yield adjustments (66,567 ) Loans receivable, net of yield adjustments $ 4,501,348 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, 2018 and June 30, 2018 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, 2018. Credit-Rating Classification of Loans Receivable At December 31, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 1,319,107 $ 1,973,190 $ 1,288,964 $ 28,405 $ 64,254 $ 94,151 $ 6,765 $ 4,774,836 Classified: Special Mention 486 1,130 1,130 - 2,818 29 34 5,627 Substandard 14,691 89 12,489 - 2,903 1,821 34 32,027 Doubtful - - - - 84 - 1 85 Loss - - - - - - - - Total classified loans 15,177 1,219 13,619 - 5,805 1,850 69 37,739 Total loans $ 1,334,284 $ 1,974,409 $ 1,302,583 $ 28,405 $ 70,059 $ 96,001 $ 6,834 $ 4,812,575 Credit-Rating Classification of Loans Receivable At June 30, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 1,283,040 $ 1,758,468 $ 1,295,076 $ 23,271 $ 80,947 $ 88,831 $ 8,937 $ 4,538,570 Classified: Special Mention 493 - - - 13 25 61 592 Substandard 13,920 116 7,885 - 4,865 1,905 61 28,752 Doubtful - - - - - - 1 1 Loss - - - - - - - - Total classified loans 14,413 116 7,885 - 4,878 1,930 123 29,345 Total loans $ 1,297,453 $ 1,758,584 $ 1,302,961 $ 23,271 $ 85,825 $ 90,761 $ 9,060 $ 4,567,915 Contractual Payment Status of Loans Receivable At December 31, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 1,324,533 $ 1,974,409 $ 1,295,530 $ 28,405 $ 69,564 $ 95,738 $ 6,748 $ 4,794,927 Past due: 30-59 days 2,428 - 5,076 - 169 8 21 7,702 60-89 days 1,664 - - - 50 28 33 1,775 90+ days 5,659 - 1,977 - 276 227 32 8,171 Total past due 9,751 - 7,053 - 495 263 86 17,648 Total loans $ 1,334,284 $ 1,974,409 $ 1,302,583 $ 28,405 $ 70,059 $ 96,001 $ 6,834 $ 4,812,575 Contractual Payment Status of Loans Receivable At June 30, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 1,290,428 $ 1,758,584 $ 1,300,570 $ 23,271 $ 85,065 $ 90,375 $ 8,917 $ 4,557,210 Past due: 30-59 days 1,457 - 1,015 - 247 104 24 2,847 60-89 days 475 - - - - 44 59 578 90+ days 5,093 - 1,376 - 513 238 60 7,280 Total past due 7,025 - 2,391 - 760 386 143 10,705 Total loans $ 1,297,453 $ 1,758,584 $ 1,302,961 $ 23,271 $ 85,825 $ 90,761 $ 9,060 $ 4,567,915 The following tables present information relating to the Company’s nonperforming and impaired loans at December 31, 2018 and June 30, 2018 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, 2018. 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, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 1,323,105 $ 1,974,320 $ 1,294,882 $ 28,405 $ 69,183 $ 95,103 $ 6,802 $ 4,791,800 Nonperforming: 90+ days past due accruing - - - - - - 32 32 Nonaccrual 11,179 89 7,701 - 876 898 - 20,743 Total nonperforming 11,179 89 7,701 - 876 898 32 20,775 Total loans $ 1,334,284 $ 1,974,409 $ 1,302,583 $ 28,405 $ 70,059 $ 96,001 $ 6,834 $ 4,812,575 Performance Status of Loans Receivable At June 30, 2018 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 1,288,261 $ 1,758,468 $ 1,297,621 $ 23,271 $ 84,587 $ 89,848 $ 9,000 $ 4,551,056 Nonperforming: 90+ days past due accruing - - - - - - 60 60 Nonaccrual 9,192 116 5,340 - 1,238 913 - 16,799 Total nonperforming 9,192 116 5,340 - 1,238 913 60 16,859 Total loans $ 1,297,453 $ 1,758,584 $ 1,302,961 $ 23,271 $ 85,825 $ 90,761 $ 9,060 $ 4,567,915 Impairment Status of Loans Receivable At December 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 $ 1,320,338 $ 1,974,320 $ 1,294,590 $ 28,405 $ 67,735 $ 94,443 $ 6,834 $ 4,786,665 Impaired loans: Impaired loans with no allowance for impairment 13,531 89 7,993 - 2,012 1,558 - 25,183 Impaired loans with allowance for impairment: Recorded investment 415 - - - 312 - - 727 Allowance for impairment (41 ) - - - (311 ) - - (352 ) Balance of impaired loans net of allowance for impairment 374 - - - 1 - - 375 Total impaired loans, excluding allowance for impairment: 13,946 89 7,993 - 2,324 1,558 - 25,910 Total loans $ 1,334,284 $ 1,974,409 $ 1,302,583 $ 28,405 $ 70,059 $ 96,001 $ 6,834 $ 4,812,575 Unpaid principal balance of impaired loans: Total impaired loans $ 19,133 $ 930 $ 11,516 $ 106 $ 6,067 $ 2,758 $ - $ 40,510 Impairment Status of Loans Receivable At June 30, 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 $ 1,285,423 $ 1,758,468 $ 1,297,617 $ 23,271 $ 81,635 $ 89,160 $ 9,060 $ 4,544,634 Impaired loans: Impaired loans with no allowance for impairment 11,255 116 5,344 - 3,963 1,601 - 22,279 Impaired loans with allowance for impairment: Recorded investment 775 - - - 227 - - 1,002 Allowance for impairment (79 ) - - - (227 ) - - (306 ) Balance of impaired loans net of allowance for impairment 696 - - - - - - 696 Total impaired loans, excluding allowance for impairment: 12,030 116 5,344 - 4,190 1,601 - 23,281 Total loans $ 1,297,453 $ 1,758,584 $ 1,302,961 $ 23,271 $ 85,825 $ 90,761 $ 9,060 $ 4,567,915 Unpaid principal balance of impaired loans: Total impaired loans $ 16,263 $ 930 $ 10,033 $ 106 $ 7,671 $ 2,702 $ - $ 37,705 Impairment Status of Loans Receivable Three and Six Months Ended December 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 December 31, 2018: Average balance of impaired loans $ 13,228 $ 95 $ 8,146 $ - $ 2,644 $ 1,571 $ - $ 25,684 Interest earned on impaired loans $ 33 $ - $ - $ - $ 27 $ 8 $ - $ 68 For the six months ended December 31, 2018: Average balance of impaired loans $ 12,718 $ 101 $ 7,626 $ - $ 2,468 $ 1,566 $ - $ 24,479 Interest earned on impaired loans $ 65 $ - $ - $ - $ 29 $ 17 $ - $ 111 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 The following table presents information regarding the restructuring of the Company’s troubled debts during the six months ended December 31, 2018 and December 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 Six Months Ended December 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 six months ended December 31, 2018: Number of loans 1 - 1 - 6 - - 8 Pre-modification outstanding recorded investment $ 271 $ - $ 2,957 $ - $ 1,468 $ - $ - $ 4,696 Post-modification outstanding recorded investment 270 - 2,955 - 1,488 - - 4,713 Reserves included in and charge offs against the allowance for loan loss recognized at modification 2 - 2 - - - - 4 Troubled debt restructuring defaults for the six months ended December 31, 2018: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - Troubled Debt Restructurings of Loans Receivable Six Months Ended December 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 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 Reserves included in and 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 $ - $ - $ - $ - $ - $ - $ - $ - 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 |