Loan Quality and Allowance for Loan Losses | 12. 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, 2019, we held one single-family property in other real estate owned, with a carrying value of $178,000 that was acquired through foreclosure on a residential mortgage loan. As of that same date, we held 10 residential mortgage loans with aggregate carrying values totaling $1.9 million which were in the process of foreclosure. As of June 30, 2019, we held no single-family properties that were acquired through foreclosures on residential mortgage loans. As of that same date, we held 11 residential mortgage loans with aggregate carrying values totaling $2.1 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, 2019 and June 30, 2019 based upon the calculation methodology as described in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2019. 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, 2019 and December 31, 2018. 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, 2019 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 6 - - - 7 - - 13 Loans collectively evaluated for impairment 3,472 16,060 8,684 142 2,001 456 109 30,924 Total allowance for loan losses $ 3,478 $ 16,060 $ 8,684 $ 142 $ 2,008 $ 456 $ 109 $ 30,937 Balance of Loans Receivable At December 31, 2019 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 $ 82 $ - $ - $ - $ 229 $ - $ - $ 311 Loans individually evaluated for impairment 11,037 3,061 8,261 - 3,138 1,683 - 27,180 Loans collectively evaluated for impairment 1,320,182 1,853,530 1,163,952 16,221 64,520 88,233 4,908 4,511,546 Total loans $ 1,331,301 $ 1,856,591 $ 1,172,213 $ 16,221 $ 67,887 $ 89,916 $ 4,908 $ 4,539,037 Unaccreted yield adjustments (46,340 ) Loans receivable, net of yield adjustments $ 4,492,697 Allowance for Loan Losses At June 30, 2019 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 31 - - - - - - 31 Loans collectively evaluated for impairment 3,346 16,959 9,672 136 2,467 491 172 33,243 Total allowance for loan losses $ 3,377 $ 16,959 $ 9,672 $ 136 $ 2,467 $ 491 $ 172 $ 33,274 Balance of Loans Receivable At June 30, 2019 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 $ 84 $ - $ - $ - $ 242 $ - $ - 326 Loans individually evaluated for impairment 12,545 70 8,900 - 1,213 1,531 - 24,259 Loans collectively evaluated for impairment 1,331,415 1,946,321 1,249,969 13,907 64,308 94,634 5,814 4,706,368 Total loans $ 1,344,044 $ 1,946,391 $ 1,258,869 $ 13,907 $ 65,763 $ 96,165 $ 5,814 $ 4,730,953 Unaccreted yield adjustments (52,025 ) Loans receivable, net of yield adjustments $ 4,678,928 Allowance for Loan Losses Three Months Ended December 31, 2019 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, 2019: At September 30, 2019: $ 3,307 $ 16,702 $ 9,371 $ 140 $ 2,293 $ 478 $ 141 $ 32,432 Total charge offs - - - - - - (44 ) (44 ) Total recoveries - - - - - - 14 14 Total provisions 171 (642 ) (687 ) 2 (285 ) (22 ) (2 ) (1,465 ) Total allowance for loan losses $ 3,478 $ 16,060 $ 8,684 $ 142 $ 2,008 $ 456 $ 109 $ 30,937 Allowance for Loan Losses Six Months Ended December 31, 2019 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, 2019: At June 30, 2019: $ 3,377 $ 16,959 $ 9,672 $ 136 $ 2,467 $ 491 $ 172 $ 33,274 Total charge offs - - - - - - (108 ) (108 ) Total recoveries - - - - - - 18 18 Total provisions 101 (899 ) (988 ) 6 (459 ) (35 ) 27 (2,247 ) Total allowance for loan losses $ 3,478 $ 16,060 $ 8,684 $ 142 $ 2,008 $ 456 $ 109 $ 30,937 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 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, 2019 and June 30, 2019 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, 2019. Credit-Rating Classification of Loans Receivable At December 31, 2019 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 1,317,865 $ 1,852,429 $ 1,163,715 $ 16,221 $ 61,182 $ 87,991 $ 4,877 $ 4,504,280 Classified: Special Mention 285 1,101 - - 2,773 164 7 4,330 Substandard 13,151 3,061 8,498 - 3,932 1,761 21 30,424 Doubtful - - - - - - 3 3 Loss - - - - - - - - Total classified loans 13,436 4,162 8,498 - 6,705 1,925 31 34,757 Total loans $ 1,331,301 $ 1,856,591 $ 1,172,213 $ 16,221 $ 67,887 $ 89,916 $ 4,908 $ 4,539,037 Credit-Rating Classification of Loans Receivable At June 30, 2019 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Non-classified $ 1,328,811 $ 1,945,205 $ 1,249,438 $ 13,907 $ 59,768 $ 94,544 $ 5,776 $ 4,697,449 Classified: Special Mention 629 1,116 - - 3,894 28 14 5,681 Substandard 14,604 70 9,431 - 2,101 1,593 23 27,822 Doubtful - - - - - - 1 1 Loss - - - - - - - - Total classified loans 15,233 1,186 9,431 - 5,995 1,621 38 33,504 Total loans $ 1,344,044 $ 1,946,391 $ 1,258,869 $ 13,907 $ 65,763 $ 96,165 $ 5,814 $ 4,730,953 Contractual Payment Status of Loans Receivable At December 31, 2019 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 1,325,062 $ 1,851,198 $ 1,170,016 $ 16,221 $ 67,822 $ 89,490 $ 4,874 $ 4,524,683 Past due: 30-59 days 1,459 2,332 220 - - 7 9 4,027 60-89 days 1,872 - - - - 287 6 2,165 90 days and over 2,908 3,061 1,977 - 65 132 19 8,162 Total past due 6,239 5,393 2,197 - 65 426 34 14,354 Total loans $ 1,331,301 $ 1,856,591 $ 1,172,213 $ 16,221 $ 67,887 $ 89,916 $ 4,908 $ 4,539,037 Contractual Payment Status of Loans Receivable At June 30, 2019 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Current $ 1,338,347 $ 1,946,391 $ 1,256,892 $ 13,907 $ 65,668 $ 95,793 $ 5,754 $ 4,722,752 Past due: 30-59 days 1,680 - - - 95 197 25 1,997 60-89 days 473 - - - - 36 13 522 90 days and over 3,544 - 1,977 - - 139 22 5,682 Total past due 5,697 - 1,977 - 95 372 60 8,201 Total loans $ 1,344,044 $ 1,946,391 $ 1,258,869 $ 13,907 $ 65,763 $ 96,165 $ 5,814 $ 4,730,953 The following tables present information relating to the Company’s nonperforming and impaired loans at December 31, 2019 and June 30, 2019 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, 2019. Loans reported as 90 days and over past due accruing in the table immediately below are also reported in the preceding contractual payment status table under the heading 90 days and over past due. Performance Status of Loans Receivable At December 31, 2019 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 1,322,377 $ 1,853,530 $ 1,163,952 $ 16,221 $ 67,276 $ 88,838 $ 4,889 $ 4,517,083 Nonperforming: 90 days and over past due accruing - - - - - - 19 19 Nonaccrual 8,924 3,061 8,261 - 611 1,078 - 21,935 Total nonperforming 8,924 3,061 8,261 - 611 1,078 19 21,954 Total loans $ 1,331,301 $ 1,856,591 $ 1,172,213 $ 16,221 $ 67,887 $ 89,916 $ 4,908 $ 4,539,037 Performance Status of Loans Receivable At June 30, 2019 Residential Mortgage Multi-Family Mortgage Non- Residential Mortgage Construction Commercial Business Home Equity Loans Other Consumer Total (In Thousands) Performing $ 1,334,101 $ 1,946,321 $ 1,249,969 $ 13,907 $ 65,294 $ 95,299 $ 5,792 $ 4,710,683 Nonperforming: 90 days and over past due accruing - - - - - - 22 22 Nonaccrual 9,943 70 8,900 - 469 866 - 20,248 Total nonperforming 9,943 70 8,900 - 469 866 22 20,270 Total loans $ 1,344,044 $ 1,946,391 $ 1,258,869 $ 13,907 $ 65,763 $ 96,165 $ 5,814 $ 4,730,953 Impairment Status of Loans Receivable At December 31, 2019 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 $ 1,320,182 $ 1,853,530 $ 1,163,952 $ 16,221 $ 64,520 $ 88,233 $ 4,908 $ 4,511,546 Impaired loans: Impaired loans with no allowance for impairment 11,024 3,061 8,261 - 3,275 1,683 - 27,304 Impaired loans with allowance for impairment: Recorded investment 95 - - - 92 - - 187 Allowance for impairment (6 ) - - - (7 ) - - (13 ) Balance of impaired loans net of allowance for impairment 89 - - - 85 - - 174 Total impaired loans, excluding allowance for impairment: 11,119 3,061 8,261 - 3,367 1,683 - 27,491 Total loans $ 1,331,301 $ 1,856,591 $ 1,172,213 $ 16,221 $ 67,887 $ 89,916 $ 4,908 $ 4,539,037 Unpaid principal balance of impaired loans: Total impaired loans $ 13,444 $ 3,544 $ 9,740 $ 73 $ 6,332 $ 2,063 $ - $ 35,196 Impairment Status of Loans Receivable At June 30, 2019 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 $ 1,331,415 $ 1,946,321 $ 1,249,969 $ 13,907 $ 64,308 $ 94,634 $ 5,814 $ 4,706,368 Impaired loans: Impaired loans with no allowance for impairment 12,266 70 8,900 - 1,455 1,531 - 24,222 Impaired loans with allowance for impairment: Recorded investment 363 - - - - - - 363 Allowance for impairment (31 ) - - - - - - (31 ) Balance of impaired loans net of allowance for impairment 332 - - - - - - 332 Total impaired loans, excluding allowance for impairment: 12,629 70 8,900 - 1,455 1,531 - 24,585 Total loans $ 1,344,044 $ 1,946,391 $ 1,258,869 $ 13,907 $ 65,763 $ 96,165 $ 5,814 $ 4,730,953 Unpaid principal balance of impaired loans: Total impaired loans $ 14,985 $ 779 $ 10,200 $ 73 $ 3,987 $ 1,924 $ - $ 31,948 Impairment Status of Loans Receivable Three and Six Months Ended December 31, 2019 and 2018 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, 2019: Average balance of impaired loans $ 11,030 $ 3,061 $ 8,593 $ - $ 3,372 $ 1,507 $ - $ 27,563 Interest earned on impaired loans $ 26 $ - $ - $ - $ 48 $ 8 $ - $ 82 For the six months ended December 31, 2019: Average balance of impaired loans $ 11,428 $ 1,769 $ 8,702 $ - $ 2,568 $ 1,535 $ - $ 26,002 Interest earned on impaired loans $ 61 $ 28 $ - $ - $ 99 $ 16 $ - $ 204 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 The following table presents information regarding the restructuring of the Company’s troubled debts during the six months ended December 31, 2019 and December 31, 2018, 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, 2019 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, 2019: Number of loans 3 - - - 4 1 - 8 Pre-modification outstanding recorded investment $ 1,046 $ - $ - $ - $ 1,867 $ 82 $ - $ 2,995 Post-modification outstanding recorded investment 982 - - - 1,921 81 - 2,984 Reserves included in and charge offs against the allowance for loan loss recognized at modification - - - - 15 - - 15 - Troubled debt restructuring defaults for the six months ended December 31, 2019: Number of loans - - - - - - - - Outstanding recorded investment $ - $ - $ - $ - $ - $ - $ - $ - 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 $ - $ - $ - $ - $ - $ - $ - $ - 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 : Temporary or permanent reduction of the interest rate charged against the outstanding balance of the loan. • Capitalization of Prior Past Dues : Capitalization of prior amounts due to the outstanding balance of the loan. • Extension of Maturity or Balloon Date : Extending the term of the loan past its original balloon or maturity date. • Deferral of Principal Payments: Temporary deferral of the principal portion of a loan payment. • Payment Recalculation and Re-amortization : Recalculation of the recurring payment obligation and resulting loan amortization/repayment schedule based on the loan’s modified terms. |