Loans Receivable | 8. LOANS RECEIVABLE The following table sets forth the composition of the Company’s loan portfolio at September 30, 2020 and June 30, 2020: September 30, June 30, 2020 2020 (In Thousands) Commercial loans: Multi-family mortgage $ 2,110,300 $ 2,059,568 Nonresidential mortgage 1,124,330 960,853 Commercial business (1) 255,888 138,788 Construction 79,178 20,961 Total commercial loans 3,569,696 3,180,170 One- to four-family residential mortgage 1,353,197 1,273,022 Consumer loans: Home equity loans 71,540 82,920 Other consumer 4,136 3,991 Total consumer loans 75,676 86,911 Total loans 4,998,569 4,540,103 Unaccreted yield adjustments (43,819 ) (41,706 ) Total loans receivable, net of yield adjustments $ 4,954,750 $ 4,498,397 (1) Includes Paycheck Protection Program (“PPP”) loans of $83.4 million and $69.0 million as of September 30, 2020 and June 30, 2020, respectively. The balance of PPP loans at September 30, 2020 includes loans acquired in conjunction with the Company’s acquisition of MSB Financial Corp. on July 10, 2020. Past Due Loans Past due status is based on the contractual payment terms of the loans. The following tables present the payment status of past due loans as of September 30, 2020 and June 30, 2020, by loan segment: September 30, 2020 Multi-Family Mortgage Non- Residential Mortgage Commercial Business Construction Residential Mortgage Home Equity Loans Other Consumer Total (In Thousands) Current $ 2,110,300 $ 1,100,082 $ 255,524 $ 79,154 $ 1,345,532 $ 71,057 $ 4,129 $ 4,965,778 Past due: 30-59 days - 6,171 - 24 1,558 6 2 7,761 60-89 days - 497 60 - 1,024 6 - 1,587 90 days and over - 17,580 304 - 5,083 471 5 23,443 Total past due - 24,248 364 24 7,665 483 7 32,791 Total loans $ 2,110,300 $ 1,124,330 $ 255,888 $ 79,178 $ 1,353,197 $ 71,540 $ 4,136 $ 4,998,569 June 30, 2020 Multi-Family Mortgage Non- Residential Mortgage Commercial Business Construction Residential Mortgage Home Equity Loans Other Consumer Total (In Thousands) Current $ 2,059,568 $ 941,714 $ 138,439 $ 20,961 $ 1,264,267 $ 82,358 $ 3,981 $ 4,511,288 Past due: 30-59 days - - - - 3,211 169 - 3,380 60-89 days - 14,478 - - 1,038 13 5 15,534 90 days and over - 4,661 349 - 4,506 380 5 9,901 Total past due - 19,139 349 - 8,755 562 10 28,815 Total loans $ 2,059,568 $ 960,853 $ 138,788 $ 20,961 $ 1,273,022 $ 82,920 $ 3,991 $ 4,540,103 Nonperforming Loans Loans are generally placed on nonaccrual status when contractual payments become 90 or more days past due or when the Company does not expect to receive all principal and interest payments (“P&I”) owed substantially in accordance with the terms of the loan agreement, regardless of past due status. Loans that become 90 days past due, but are well secured and in the process of collection, may remain on accrual status. Nonaccrual loans are generally returned to accrual status when all payments due are brought current and we expect to receive all remaining P&I payments owed substantially in accordance with the terms of the loan agreement. Payments received in cash on nonaccrual loans, including both the principal and interest portions of those payments, are generally applied to reduce the carrying value of the loan. The Company did not recognize interest income on non-accrual loans for the three months ended September 30, 2020 and September 30, 2019. The following tables present information relating to the Company’s nonperforming loans as of September 30, 2020 and June 30, 2020: September 30, 2020 Multi-Family Mortgage Non- Residential Mortgage Commercial Business Construction Residential Mortgage Home Equity Loans Other Consumer Total (In Thousands) Performing $ 2,107,376 $ 1,097,576 $ 255,349 $ 76,640 $ 1,341,463 $ 70,959 $ 4,131 $ 4,953,494 Nonperforming: 90 days and over past due accruing - 238 - - - - - 238 Nonaccrual loans with allowance for credit losses - 3,191 124 - 1,401 6 5 4,727 Nonaccrual loans with no allowance for credit losses 2,924 23,325 415 2,538 10,333 575 - 40,110 Total nonperforming 2,924 26,754 539 2,538 11,734 581 5 45,075 Total loans $ 2,110,300 $ 1,124,330 $ 255,888 $ 79,178 $ 1,353,197 $ 71,540 $ 4,136 $ 4,998,569 June 30, 2020 Multi-Family Mortgage Non- Residential Mortgage Commercial Business Construction Residential Mortgage Home Equity Loans Other Consumer Total (In Thousands) Performing $ 2,056,606 $ 936,917 $ 138,196 $ 20,961 $ 1,264,663 $ 82,078 $ 3,986 $ 4,503,407 Nonperforming: 90 days and over past due accruing - - - - - - 5 5 Nonaccrual 2,962 23,936 592 - 8,359 842 - 36,691 Total nonperforming 2,962 23,936 592 - 8,359 842 5 36,696 Total loans $ 2,059,568 $ 960,853 $ 138,788 $ 20,961 $ 1,273,022 $ 82,920 $ 3,991 $ 4,540,103 Troubled Debt Restructurings (“TDRs”) On a case-by-case basis, the Company may agree to modify the contractual terms of a loan to assist a borrower who may be experiencing financial difficulty, as well as to preserve the Company’s position in the loan. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a TDR. At September 30, 2020, the Company had TDRs totaling $20.1 million. The allowance for credit losses associated with the TDRs presented in the tables below totaled $210,000 and $8,000 as of September 30, 2020 and June 30, 2020, respectively. As of September 30, 2020, there were no significant commitments to lend additional funds to borrowers whose loans had been restructured in a TDR. The following tables present total TDR loans at September 30, 2020 and June 30, 2020: September 30, 2020 Accrual Non-accrual Total # of Loans Amount # of Loans Amount # of Loans Amount (Dollars In Thousands) Commercial loans: Multi-family mortgage loans - $ - 1 $ 2,924 1 $ 2,924 Nonresidential mortgage 1 110 8 2,755 9 2,865 Commercial business 5 5,103 5 434 10 5,537 Construction - - 1 2,538 1 2,538 Total commercial loans 6 5,213 15 8,651 21 13,864 One- to four-family residential mortgage 14 2,067 19 3,541 33 5,608 Consumer loans: Home equity loans 8 543 1 97 9 640 Total 28 $ 7,823 35 $ 12,289 63 $ 20,112 June 30, 2020 Accrual Non-accrual Total # of Loans Amount # of Loans Amount # of Loans Amount (Dollars In Thousands) Commercial loans: Multi-family mortgage loans - $ - 1 $ 2,962 1 $ 2,962 Nonresidential mortgage 1 112 9 5,442 10 5,554 Commercial business 5 5,179 6 446 11 5,625 Total commercial loans 6 5,291 16 8,850 22 14,141 One- to four-family residential mortgage 14 2,407 20 3,811 34 6,218 Consumer loans: Home equity loans 12 715 2 448 14 1,163 Total 32 $ 8,413 38 $ 13,109 70 $ 21,522 The following tables present information regarding the restructuring of the Company’s troubled debts during the three months ended September 30, 2020 and September 30, 2019. Three Months Ended September 30, 2020 # of Loans Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded Investment (Dollars In Thousands) Residential mortgage 1 $ 309 $ 308 Total 1 $ 309 $ 308 Three Months Ended September 30, 2019 # of Loans Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded Investment (Dollars In Thousands) Commercial business 3 1,775 1,829 Residential mortgage 2 1,002 938 Home equity loans 1 82 81 Total 6 $ 2,859 $ 2,848 During the three months ended September 30, 2019, TDRs resulted in charge-offs of $8,000 which were recognized at modification. During the three months ended September 30, 2020, there were no charge-offs related to TDRs. During the three months ended September 30, 2020 and 2019, there were no troubled debt restructuring defaults Loan modifications generally involve a reduction in interest rates and/or extension of maturity dates and also may include step up interest rates in their modified terms which will impact their weighted average yield in the future. The residential mortgage loan which qualified as a TDR during the three months ended September 30, 2020, capitalized prior past due amounts and modified the loan’s repayment terms. In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation, issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extension of repayment terms, or other delays in payment that are insignificant. Provisions of the CARES Act largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other considerations set forth in the interagency statements were met. Borrowers considered current are those that are less than 30 days past due at the time a modification program is implemented or at December 31, 2019. As of September 30, 2020, the Company had 63 non-TDR modified loans totaling approximately $76.9 million. The following table sets forth the composition of these loans by loan segments as of September 30, 2020: September 30, 2020 # of Loans (1) Balance (1) (Dollars In Thousands) Commercial loans: Multi-family mortgage loans 7 $ 15,910 Nonresidential mortgage 11 41,660 Commercial business 4 2,684 Construction 1 2,537 Total commercial loans 23 62,791 Residential mortgage 36 13,866 Consumer loans: Home equity loans 4 252 Total loans 63 $ 76,909 (1) Includes loans acquired in conjunction with the Company’s acquisition of MSB Financial Corp. on July 10, 2020. Individually Analyzed Loans Effective July 1, 2020, individually analyzed loans include loans which do not share similar risk characteristics with other loans. TDR’s will generally be evaluated for individual impairment, however, after a period of sustained repayment performance which permits the credit to be returned to accrual status, a TDR would generally be removed from individual impairment analysis and returned to its corresponding pool. As of September 30, 2020, the carrying value of individually analyzed loans totaled $44.8 million, of which $32.5 million were considered collateral dependent. For collateral dependent loans where management has determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the loan is to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral, less costs to sell, and the amortized cost basis of the loan as of the measurement date. See Note 16 for additional disclosure regarding fair value of individually analyzed collateral dependent loans. The following table presents the carrying value of collateral dependent individually analyzed loans: September 30, 2020 Carrying Value Related Allowance (In Thousands) Commercial loans: Nonresidential mortgage (1) $ 24,120 $ 580 Commercial business (2) 199 - Total commercial loans 24,319 580 Residential mortgage (3) 7,722 218 Consumer loans: Home equity loans (3) 471 - Total $ 32,512 $ 798 (1) Secured by income-producing property. (2) Secured by business assets. (3) Secured by one- to four-family properties. The following table presents, under previously applicable GAAP, loans individually evaluated for impairment by portfolio segment as of June 30, 2020: June 30, 2020 Multi-Family Mortgage Non- Residential Mortgage Commercial Business Construction Residential Mortgage Home Equity Loans Other Consumer Total (In Thousands) Carrying value of impaired loans: Non-impaired loans $ 2,056,606 $ 936,805 $ 132,999 $ 20,961 $ 1,262,256 $ 81,363 $ 3,991 $ 4,494,981 Impaired loans: Impaired loans with no allowance for impairment 2,962 22,516 5,622 - 10,659 1,557 - 43,316 Impaired loans with allowance for impairment: Recorded investment - 1,532 167 - 107 - - 1,806 Allowance for impairment - (41 ) (47 ) - (1 ) - - (89 ) Balance of impaired loans net of allowance for impairment - 1,491 120 - 106 - - 1,717 Total impaired loans, excluding allowance for impairment: 2,962 24,048 5,789 - 10,766 1,557 - 45,122 Total loans $ 2,059,568 $ 960,853 $ 138,788 $ 20,961 $ 1,273,022 $ 82,920 $ 3,991 $ 4,540,103 Unpaid principal balance of impaired loans: Total impaired loans $ 3,544 $ 25,898 $ 8,778 $ 73 $ 12,908 $ 1,950 $ - $ 53,151 Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings: Pass – Loans that are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner. Special Mention – Loans which do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses. Substandard – Loans which are inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful – Loans which have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values. Loss – Loans which considered uncollectible or of so little value that their continuance as assets is not warranted. The following table presents the risk category of loans as of September 30, 2020 by loan segment and vintage year: Term Loans Amortized Cost by Origination Year for Fiscal Years ended June 30, 2021 2020 2019 2018 2017 Prior Revolving Loans Total (In Thousands) Multi-family mortgage: Pass $ 71,975 $ 261,063 $ 436,822 $ 413,844 $ 416,703 $ 486,683 $ - $ 2,087,090 Special Mention - - - - - 10,060 - 10,060 Substandard - - - 2,924 10,226 - - 13,150 Doubtful - - - - - - - - Total multi-family mortgage 71,975 261,063 436,822 416,768 426,929 496,743 - 2,110,300 Non-residential mortgage: Pass 10,968 85,510 79,459 79,873 296,213 533,504 6,249 1,091,776 Special Mention - - - - - 4,373 - 4,373 Substandard - - - - 16,028 12,153 - 28,181 Doubtful - - - - - - - - Total non-residential mortgage 10,968 85,510 79,459 79,873 312,241 550,030 6,249 1,124,330 Commercial business: Pass 18,802 97,441 5,086 28,363 11,684 26,666 62,032 250,074 Special Mention - - 11 2,370 147 15 - 2,543 Substandard - 84 - 1,598 65 1,337 187 3,271 Doubtful - - - - - - - - Total commercial business 18,802 97,525 5,097 32,331 11,896 28,018 62,219 255,888 Construction loans: Pass 1,454 17,123 14,354 20,643 15,715 1,592 5,735 76,616 Special Mention - - - - - - - - Substandard - - - - - 2,562 - 2,562 Doubtful - - - - - - - - Total construction loans 1,454 17,123 14,354 20,643 15,715 4,154 5,735 79,178 Residential mortgage: Pass 50,150 204,875 114,802 111,794 178,430 673,678 921 1,334,650 Special Mention - - - - - 713 - 713 Substandard - 452 589 - 573 16,220 - 17,834 Doubtful - - - - - - - - Total residential mortgage 50,150 205,327 115,391 111,794 179,003 690,611 921 1,353,197 Home equity loans: Pass 206 4,672 8,192 4,158 3,366 20,943 28,637 70,174 Special Mention - - - - - 175 26 201 Substandard - - - - 68 1,097 - 1,165 Doubtful - - - - - - - - Total home equity loans 206 4,672 8,192 4,158 3,434 22,215 28,663 71,540 Other consumer loans Pass 280 565 818 240 137 1,899 75 4,014 Special Mention - - - - - - - - Substandard - - - - - - 1 1 Doubtful - - - - - 5 116 121 Other consumer loans 280 565 818 240 137 1,904 192 4,136 Total loans $ 153,835 $ 671,785 $ 660,133 $ 665,807 $ 949,355 $ 1,793,675 $ 103,979 $ 4,998,569 The following table presents , un der previously applicable GAAP, the risk category of loans as of June 30, 2020 by loan segment : June 30, 2020 Multi-Family Mortgage Non- Residential Mortgage Commercial Business Construction Residential Mortgage Home Equity Loans Other Consumer Total (In Thousands) Pass $ 2,055,520 $ 932,202 $ 132,818 $ 20,961 $ 1,258,246 $ 81,120 $ 3,979 $ 4,484,846 Special Mention 1,086 4,373 2,585 - 981 157 5 9,187 Substandard 2,962 24,278 3,385 - 13,795 1,643 6 46,069 Doubtful - - - - - - 1 1 Total loans $ 2,059,568 $ 960,853 $ 138,788 $ 20,961 $ 1,273,022 $ 82,920 $ 3,991 $ 4,540,103 Purchased Credit Deteriorated Loans Loans acquired in a business combination after July 1, 2020 are recorded in accordance with ASC Topic 326, after which acquired loans are separated into two types. PCD loans are acquired loans that, as of the acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. Non-PCD loans are acquired loans that have experienced no or insignificant deterioration in credit quality since origination. To distinguish between the two types of acquired loans, the Company evaluates risk characteristics that have been determined to be indicators of deteriorated credit quality. The determining criteria may involve loan specific characteristics such as payment status, debt service coverage or other changes in creditworthiness since the loan was originated, while others are relevant to recent economic conditions, such as borrowers in industries impacted by the pandemic. As part of the acquisition of MSB, the Company has purchased loans, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows: At July 10, 2020 (In Thousands) Purchase price of PCD loans at acquisition $ 69,415 Allowance for credit losses at acquisition (3,901 ) Non-credit discount at acquisition (167 ) Amortized cost of acquired PCD loans at acquisition $ 65,347 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, 2020, we held one single-family property in other real estate owned with an aggregate carrying value of $178,000 that was acquired through a foreclosure on a residential mortgage loan. As of that same date, we held nine residential mortgage loans with aggregate carrying values totaling $1.7 million which were in the process of foreclosure. As of June 30, 2020, we held one single-family property in other real estate owned with an aggregate carrying value of $178,000 that was acquired through a foreclosure on a residential mortgage loan. As of that same date, we held nine residential mortgage loans with aggregate carrying values totaling $1.9 million which were in the process of foreclosure. The States of New Jersey and New York have issued executive orders and enacted legislation declaring moratoriums on removing individuals from a residential property as a result of an eviction or foreclosure proceeding. The New Jersey order will be in effect until two months after the Governor has declared an end to the COVID-19 health crisis. The New York law will be in effect until the state’s COVID-19-related executive orders are no longer in effect. As a result, since March 28, 2020, the Company has temporarily suspended residential property foreclosure sales and evictions. |