LOANS | 5. LOANS Portfolio loans consist of the following: June 30, December 31, 2016 2015 (Dollars in thousands) Commercial loans Multifamily $ 81,022 $ 80,170 Nonresidential 196,110 175,456 Land 9,748 9,301 Construction 61,744 38,812 Secured 84,390 63,182 Unsecured 4,414 2,831 Total commercial loans 437,428 369,752 Residential mortgage loans One-to four-family 747,530 733,685 Construction 35,275 40,898 Total residential mortgage loans 782,805 774,583 Consumer loans Home equity 160,206 161,338 Auto 19,580 11,348 Marine 2,208 2,699 Recreational vehicle 8,691 10,656 Other 2,587 2,217 Total consumer loans 193,272 188,258 Total loans 1,413,505 1,332,593 Less: Allowance for loan losses 17,172 17,712 Deferred loan costs, net (1,773 ) (1,311 ) Total 15,399 16,401 Loans, net $ 1,398,106 $ 1,316,192 The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and are based on impairment method as of June 30, 2016 and December 31, 2015 and activity for the three and six months ended June 30, 2016 and 2015. Allowance For Loan Losses Commercial Loans Residential Loans Consumer Loans Total (Dollars in thousands) For the three months ended June 30, 2016 Beginning balance $ 8,521 $ 5,736 $ 2,646 $ 16,903 Provision (recovery) 489 (33 ) (61 ) 395 Charge-offs (147 ) (84 ) (276 ) (507 ) Recoveries 95 25 261 381 Ending balance $ 8,958 $ 5,644 $ 2,570 $ 17,172 For the six months ended June 30, 2016 Beginning balance $ 8,077 $ 6,630 $ 3,005 $ 17,712 Provision (recovery) 3,213 (627 ) (36 ) 2,550 Charge-offs (2,493 ) (446 ) (755 ) (3,694 ) Recoveries 161 87 356 604 Ending balance $ 8,958 $ 5,644 $ 2,570 $ 17,172 June 30, 2016 Period-end amount allocated to: Loans individually evaluated for impairment $ 1,015 $ 1,333 $ 536 $ 2,884 Loans collectively evaluated for impairment 7,943 4,311 2,034 14,288 Ending balance $ 8,958 $ 5,644 $ 2,570 $ 17,172 Period-end balances: Loans individually evaluated for impairment $ 13,914 $ 18,555 $ 9,155 $ 41,624 Loans collectively evaluated for impairment 423,514 764,250 184,117 1,371,881 Ending balance $ 437,428 $ 782,805 $ 193,272 $ 1,413,505 Allowance For Loan Losses Commercial Loans Residential Loans Consumer Loans Total For the three months ended June 30, 2015 Beginning balance $ 5,945 $ 7,666 $ 3,610 $ 17,221 Provision (recovery) 1,015 (278 ) 16 753 Charge-offs (779 ) (328 ) (357 ) (1,464 ) Recoveries 208 22 141 371 Ending balance $ 6,389 $ 7,082 $ 3,410 $ 16,881 For the six months ended June 30, 2015 Beginning balance $ 5,690 $ 8,517 $ 3,480 $ 17,687 Provision (recovery) 1,173 (1,149 ) 545 569 Charge-offs (794 ) (494 ) (888 ) (2,176 ) Recoveries 320 208 273 801 Ending balance $ 6,389 $ 7,082 $ 3,410 $ 16,881 December 31, 2015 Period-end amount allocated to: Loans individually evaluated for impairment $ 568 $ 1,541 $ 707 $ 2,816 Loans collectively evaluated for impairment 7,509 5,089 2,298 14,896 Ending balance $ 8,077 $ 6,630 $ 3,005 $ 17,712 Period-end balances: Loans individually evaluated for impairment $ 9,698 $ 19,348 $ 10,613 $ 39,659 Loans collectively evaluated for impairment 360,054 755,235 177,645 1,292,934 Ending balance $ 369,752 $ 774,583 $ 188,258 $ 1,332,593 The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on an analysis using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, general economic conditions in the market area and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Other loans not reviewed specifically by management are evaluated as a homogenous group of loans (generally single-family residential mortgage loans and all consumer credits except marine loans) using a loss factor applied to the outstanding loan balance to determine the level of reserve required. This loss factor consists of two components, a quantitative and a qualitative component. The quantitative component is based on a historical analysis of all charged-off loans, net of recoveries. In determining the qualitative factors, consideration is given to such attributes as lending policies, economic conditions, nature and volume of the portfolio, management, loan quality trend, loan review, collateral value, concentrations, economic cycles and other external factors. As of June 30, 2016, the Company evaluated 16 quarters of net charge-off history and applied this information to the current period. This component is combined with the qualitative component to arrive at the loss factor, which is applied to the outstanding balance of homogenous loans. The following table presents loans individually evaluated for impairment by class of loans as of and for six months ended June 30, 2016: Impaired Loans (Dollars in thousands) Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized With no specific allowance recorded Commercial loans Multifamily $ 95 $ — $ — $ — $ — $ — Nonresidential 1,382 326 — 281 3 3 Land 3,922 384 — 384 — — Construction 3,594 — — — — — Secured 3,745 3,700 — 3,700 — — Unsecured 1,118 — — — — — Total commercial loans 13,856 4,410 — 4,365 3 3 Residential mortgage loans One-to four-family 8,102 6,522 — 6,156 52 42 Construction — — — — — — Total residential mortgage loans 8,102 6,522 — 6,156 52 42 Consumer loans Home equity 1,858 1,339 — 1,463 4 4 Auto 16 9 — 11 — — Marine 544 302 — 292 — — Recreational vehicle 518 273 — 213 2 2 Other 4 4 — 3 — — Total consumer loans 2,940 1,927 — 1,982 6 6 Total $ 24,898 $ 12,859 $ — $ 12,503 $ 61 $ 51 With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — $ — $ — $ — Nonresidential 10,854 8,571 922 7,493 124 122 Land — — — — — — Construction — — — — — — Secured 1,027 933 93 739 — — Unsecured — — — — — — Total commercial loans 11,881 9,504 1,015 8,232 124 122 Residential mortgage loans One-to four-family 12,033 12,033 1,333 12,742 297 251 Construction — — — — — — Total residential mortgage loans 12,033 12,033 1,333 12,742 297 251 Consumer loans Home equity 6,279 6,279 447 6,791 188 167 Auto — — — — — — Marine 156 156 4 159 4 4 Recreational vehicle 793 793 85 868 15 14 Other — — — 3 — — Total consumer loans 7,228 7,228 536 7,821 207 185 Total 31,142 28,765 2,884 28,795 628 558 Total impaired loans $ 56,040 $ 41,624 $ 2,884 $ 41,298 $ 689 $ 609 The following tables present loans individually evaluated for impairment by class of loans as of and for six months ended June 30, 2015: Impaired Loans (Dollars in thousands) Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized With no specific allowance recorded Commercial loans Multifamily $ 109 $ — $ — $ 64 $ 3 $ 3 Nonresidential 4,175 2,431 — 3,567 3 3 Land 3,922 496 — 523 — — Construction 1,126 88 — 276 — — Secured 3,892 3,700 — 3,702 — — Unsecured 1,357 — — — 1 — Total commercial loans 14,581 6,715 — 8,132 7 6 Residential mortgage loans One-to four-family 5,925 4,411 — 4,939 30 27 Construction — — — — — — Total residential mortgage loans 5,925 4,411 — 4,939 30 27 Consumer loans Home equity 1,940 1,388 — 1,586 9 9 Auto 30 22 — 47 — — Marine 510 284 — 221 2 2 Recreational vehicle 95 66 — 117 1 1 Other — — — 1 — — Total consumer loans 2,575 1,760 — 1,972 12 12 Total $ 23,081 $ 12,886 $ — $ 15,043 $ 49 $ 45 With a specific allowance recorded Commercial loans Multifamily $ 153 $ 85 $ 17 $ 31 $ — $ — Nonresidential 6,321 6,141 611 4,833 76 72 Land — — — — — — Construction 2,815 327 42 967 — — Secured 324 324 3 324 — — Unsecured — — — — — — Total commercial loans 9,613 6,877 673 6,155 76 72 Residential mortgage loans One-to four-family 14,828 14,828 1,651 14,524 331 280 Construction — — — — — — Total residential mortgage loans 14,828 14,828 1,651 14,524 331 280 Consumer loans Home equity 8,554 8,554 646 9,260 234 211 Auto 4 4 — 6 — — Marine — — — — — — Recreational vehicle 705 705 115 723 11 10 Other — — — — — — Total consumer loans 9,263 9,263 761 9,989 245 221 Total 33,704 30,968 3,085 30,668 652 573 Total impaired loans $ 56,785 $ 43,854 $ 3,085 $ 45,711 $ 701 $ 618 The following table present loans individually evaluated for impairment by class of loans as of December 31, 2015: Impaired Loans (Dollars in thousands) Unpaid Principal Balance Recorded Investment Allowance for Loan Losses Allocated With no specific allowance recorded Commercial loans Multifamily $ 165 $ — $ — Nonresidential 1,215 306 — Land 3,922 384 — Construction 3,593 — — Secured 3,884 3,700 — Unsecured 1,132 — — Total commercial loans 13,911 4,390 — Residential mortgage loans One-to four-family 7,607 5,866 — Construction — — — Total residential mortgage loans 7,607 5,866 — Consumer loans Home equity 2,245 1,718 — Auto 20 14 — Marine 496 271 — Recreational vehicle 121 78 — Other 3 3 — Total consumer loans 2,885 2,084 — Total $ 24,403 $ 12,340 $ — With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — Nonresidential 5,164 4,984 565 Land — — — Construction — — — Secured 324 324 3 Unsecured — — — Total commercial loans 5,488 5,308 568 Residential mortgage loans One-to four-family 13,482 13,482 1,541 Construction — — — Total residential mortgage loans 13,482 13,482 1,541 Consumer loans Home equity 7,236 7,236 522 Auto — — — Marine 163 163 3 Recreational vehicle 1,122 1,122 181 Other 8 8 1 Total consumer loans 8,529 8,529 707 Total 27,499 27,319 2,816 Total impaired loans $ 51,902 $ 39,659 $ 2,816 The following tables present loans individually evaluated for impairment by class of loans as of and for the three months ended June 30, 2016: Impaired Loans (Dollars in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized With no specific allowance recorded Commercial loans Multifamily $ — $ — $ — Nonresidential 269 1 1 Land 384 — — Construction — — — Secured 3,700 — — Unsecured — — — Total commercial loans 4,353 1 1 Residential mortgage loans One-to four-family 6,302 17 17 Construction — — — Total residential mortgage loans 6,302 17 17 Consumer loans Home equity 1,336 1 1 Auto 9 — — Marine 303 — — Recreational vehicle 281 1 1 Other 4 — — Total consumer loans 1,933 2 2 Total $ 12,588 $ 20 $ 20 With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — Nonresidential 8,748 15 15 Land — — — Construction — — — Secured 947 — — Unsecured — — — Total commercial loans 9,695 15 15 Residential mortgage loans One-to four-family 12,372 124 122 Construction — — — Total residential mortgage loans 12,372 124 122 Consumer loans Home equity 6,568 84 82 Auto — — — Marine 158 2 2 Recreational vehicle 741 8 8 Other — — — Total consumer loans 7,467 94 92 Total 29,534 233 229 Total impaired loans $ 42,122 $ 253 $ 249 The following tables present loans individually evaluated for impairment by class of loans as of and for the three months ended June 30, 2015: Impaired Loans (Dollars in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized With no specific allowance recorded Commercial loans Multifamily $ 43 $ 3 $ 3 Nonresidential 2,441 2 2 Land 514 — Construction 138 — — Secured 3,700 — — Unsecured — 1 — Total commercial loans 6,836 6 5 Residential mortgage loans One-to four-family 4,530 12 12 Construction — — — Total residential mortgage loans 4,530 12 12 Consumer loans Home equity 1,534 2 2 Auto 27 — — Marine 289 — — Recreational vehicle 68 — — Other — — — Total consumer loans 1,918 2 2 Total $ 13,284 $ 20 $ 19 With a specific allowance recorded Commercial loans Multifamily $ 43 $ — $ — Nonresidential 6,254 38 34 Land — — — Construction 595 — — Secured 324 — — Unsecured — — — Total commercial loans 7,216 38 34 Residential mortgage loans One-to four-family 14,712 104 104 Construction — — — Total residential mortgage loans 14,712 104 104 Consumer loans Home equity 8,905 79 79 Auto 5 — — Marine — — — Recreational vehicle 711 — — Other — — — Total consumer loans 9,621 79 79 Total 31,549 221 217 Total impaired loans $ 44,833 $ 241 $ 236 The unpaid principal balance is the total amount of the loan that is due to Home Savings. The recorded investment includes the unpaid principal balance less any chargeoffs or partial chargeoffs applied to specific loans. The unpaid principal balance and the recorded investment both exclude accrued interest receivable and deferred loan costs, both of which are immaterial. Within secured and nonresidential impaired loans, there are two related credits with a total principal balance outstanding of $7.0 million. The source of repayment for the loan resides in funds held in escrow by a court that has administered foreclosure and receivership proceedings surrounding the loan. The loan has been subject to protracted litigation and a reserve of $546,000 was placed on one of the loans during 2015. Home Savings reclassifies a collateralized mortgage loan and consumer loans secured by real estate to real estate owned and other repossessed assets once it has either obtained legal title to the real estate collateral or the borrower voluntarily conveys all interest in the real property to the Bank to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The table below presents loans that are in the process of foreclosure at June 30, 2016 and December 31, 2015, but legal title, deed in lieu of foreclosure or similar legal agreement to the property has not yet been obtained: June 30, 2016 December 31, 2015 Unpaid Principal Balance Recorded Investment Unpaid Principal Balance Recorded Investment (Dollars in thousands) (Dollars in thousands) Mortgage loans in process of foreclosure $ 2,799 $ 2,475 $ 1,294 $ 1,162 Consumer loans in process of foreclosure 913 793 845 643 The following table presents the recorded investment in nonaccrual and loans past due over 90 days and still on accrual by class of loans as of June 30, 2016: Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing As of June 30, 2016 Nonaccrual Loans past due over 90 days and still accruing (Dollars in thousands) Commercial loans Multifamily $ — $ — Nonresidential 7,362 — Land 384 — Construction — — Secured 4,633 — Unsecured — — Total commercial loans 12,379 — Residential mortgage loans One-to four-family 5,713 — Construction — — Total residential mortgage loans 5,713 — Consumer Loans Home equity 1,577 — Auto 36 — Marine 246 — Recreational vehicle 386 — Other 4 — Total consumer loans 2,249 — Total nonaccrual loans and loans past due over 90 days and still accruing $ 20,341 $ — The following table presents the recorded investment in nonaccrual and loans past due over 90 days and still on accrual by class of loans as of December 31, 2015: Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing As of December 31, 2015 Nonaccrual Loans past due over 90 days and still accruing (Dollars in thousands) Commercial loans Multifamily $ — $ — Nonresidential 3,599 — Land 384 — Construction — — Secured 4,016 — Unsecured — — Total commercial loans 7,999 — Residential mortgage loans One-to four-family 6,181 — Construction — — Total residential mortgage loans 6,181 — Consumer Loans Home equity 1,804 — Auto 23 — Marine 218 — Recreational vehicle 511 — Other 11 — Total consumer loans 2,567 — Total nonaccrual loans and loans past due over 90 days and still accruing $ 16,747 $ — The following table presents an age analysis of past-due loans, segregated by class of loans as of June 30, 2016: Past Due Loans (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Loans Total Loans Commercial loans Multifamily $ — $ — $ — $ — $ 81,022 $ 81,022 Nonresidential 28 8 3,501 3,537 192,573 196,110 Land — — 384 384 9,364 9,748 Construction — — — — 61,744 61,744 Secured — — 4,633 4,633 79,757 84,390 Unsecured — — — — 4,414 4,414 Total commercial loans 28 8 8,518 8,554 428,874 437,428 Residential mortgage loans One-to four-family 2,550 1,182 5,402 9,134 738,396 747,530 Construction — — — — 35,275 35,275 Total residential mortgage loans 2,550 1,182 5,402 9,134 773,671 782,805 Consumer Loans: Home equity 635 528 1,473 2,636 157,570 160,206 Automobile 16 9 6 31 19,549 19,580 Marine — 139 107 246 1,962 2,208 Recreational vehicle 59 77 309 445 8,246 8,691 Other 12 2 4 18 2,569 2,587 Total consumer loans 722 755 1,899 3,376 189,896 193,272 Total loans $ 3,300 $ 1,945 $ 15,819 $ 21,064 $ 1,392,441 $ 1,413,505 The following table presents an age analysis of past-due loans, segregated by class of loans as of December 31, 2015: Past Due Loans (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days Past Due Total Past Due Current Loans Total Loans Commercial loans Multifamily $ — $ — $ — $ — $ 80,170 $ 80,170 Nonresidential — — 3,558 3,558 171,898 175,456 Land — — 384 384 8,917 9,301 Construction — — — — 38,812 38,812 Secured 488 — 4,016 4,504 58,678 63,182 Unsecured — — — — 2,831 2,831 Total commercial loans 488 — 7,958 8,446 361,306 369,752 Residential mortgage loans One-to four-family 3,843 635 5,901 10,379 723,306 733,685 Construction — — — — 40,898 40,898 Total residential mortgage loans 3,843 635 5,901 10,379 764,204 774,583 Consumer Loans: Home equity 961 268 1,788 3,017 158,321 161,338 Automobile 5 — 10 15 11,333 11,348 Marine — 51 117 168 2,531 2,699 Recreational vehicle 71 — 494 565 10,091 10,656 Other 15 1 11 27 2,190 2,217 Total consumer loans 1,052 320 2,420 3,792 184,466 188,258 Total loans $ 5,383 $ 955 $ 16,279 $ 22,617 $ 1,309,976 $ 1,332,593 As of June 30, 2016 and December 31, 2015, the Company has a recorded investment in troubled debt restructurings of $28.6 million and $26.3 million, respectively. The Company has allocated $2.3 million of specific allowance for those loans at June 30, 2016 and December 31, 2015, respectively. The Company has committed to lend additional amounts totaling up to $30,000 and $42,000 at June 30, 2016 and December 31, 2015, respectively. The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended June 30, 2016: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (In thousands) Commercial loans Multifamily — $ — $ — Nonresidential 1 4,000 4,000 Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans 1 4,000 4,000 Residential mortgage loans One-to four-family 1 97 98 Construction — — — Total residential mortgage loans 1 97 98 Consumer loans Home equity 2 110 114 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 2 110 114 Total restructured loans 4 $ 4,207 $ 4,212 The troubled debt restructurings described above increased the allowance for loan losses by $6,000 and resulted in no charge-offs during the three months ended June 30, 2016. The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2016: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (In thousands) Commercial loans Multifamily — $ — $ — Nonresidential 2 4,088 4,088 Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans 2 4,088 4,088 Residential mortgage loans One-to four-family 3 316 335 Construction — — — Total residential mortgage loans 3 316 335 Consumer loans Home equity 3 130 134 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 3 130 134 Total restructured loans 8 $ 4,534 $ 4,557 The troubled debt restructurings described above increased the allowance for loan losses by $11,000 and resulted in no chargeoffs during the six months ended June 30, 2016. The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended June 30, 2015: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (Dollars in thousands) Commercial loans Multifamily — $ — $ — Nonresidential — — — Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans — — — Residential mortgage loans One-to four-family 5 469 476 Construction — — — Total residential mortgage loans 5 469 476 Consumer loans Home equity 4 128 129 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 4 128 129 Total restructured loans 9 $ 597 $ 605 The troubled debt restructurings described above increased the allowance for loan losses by $24,000, and resulted in no chargeoffs during the three months ended June 30, 2015. The following table presents loans by class modified as troubled debt restructurings that occurred during the six months ended June 30, 2015: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (Dollars in thousands) Commercial loans Multifamily — $ — $ — Nonresidential — — — Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans — — — Residential mortgage loans One-to four-family 10 910 930 Construction — — — Total residential mortgage loans 10 910 930 Consumer loans Home equity 6 482 483 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 6 482 483 Total restructured loans 16 $ 1,392 $ 1,413 The troubled debt restructurings described above increased the allowance for loan losses by $82,000 and resulted in no chargeoffs during the six months ended June 30, 2015. There were no loans modified as troubled debt restructurings for which there was a payment default within a twelve month cycle following the modification during the period ended June 30, 2016. The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within a twelve month cycle following the modification during the period ended June 30, 2015: Number of loans Recorded Investment (Dollars in thousands) Commercial loans Multifamily — $ — Nonresidential — — Land — — Construction — — Secured — — Unsecured — — Total commercial loans — — Residential mortgage loans One-to four-family 1 76 Construction — — Total residential mortgage loans 1 76 Consumer loans Home equity 2 56 Auto — — Marine — — Recreational vehicle — — Other — — Total consumer loans 2 56 Total restructured loans 3 $ 132 The troubled debt restructurings that subsequently defaulted described above resulted in no charge-offs during the three and six months ended June 30, 2015, and had no effect on the provision for loan losses. A troubled debt restructuring is considered to be in payment default once it is 30 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy. 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 by classifying the loans as to credit risk. This analysis includes homogeneous loans past due 90 cumulative days, and all non-homogeneous loans including commercial loans and commercial real estate loans. Smaller balance homogeneous loans are primarily monitored by payment status. Asset quality ratings are divided into two groups: Pass (unclassified) and Classified. Within the unclassified group, certain loans that display potential weakness are risk rated as special mention. In addition, there are three classified risk ratings: substandard, doubtful and loss. These specific credit risk categories are defined as follows: Special Mention. Loans classified as special mention have potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loss. Loans classified as loss are considered uncollectible and of such little value, that continuance as assets is not warranted. Although there may be a chance of recovery on these assets, it is not practical or desirable to defer writing off the asset. The Company monitors loans on a monthly basis to determine if they should be included in one of the categories listed above. All impaired non-homogeneous credits classified as Substandard, Doubtful or Loss are analyzed on an individual basis for a specific reserve requirement. This analysis is performed on each individual credit at least annually or more frequently if warranted. As of June 30, 2016 and December 31, 2015, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: Loans June 30, 2016 (Dollars in thousands) Unclassified Classified Unclassified Special Mention Substandard Doubtful Loss Total Classified Total Loans Commercial Loans Multifamily $ 76,493 $ 3,646 $ 883 $ — $ — $ 883 $ 81,022 Nonresidential 177,246 2,432 16,432 — — 16,432 196,110 Land 9,364 — 384 — — 384 9,748 Construction 61,744 — — — — — 61,744 Secured 71,940 19 12,431 — — 12,431 84,390 Unsecured 4,317 — 97 — — 97 4,414 Total commercial loans 401,104 6,097 30,227 — — 30,227 437,428 Residential mortgage loans One-to four-family 740,501 106 6,923 — — 6,923 747,530 Construction 35,275 — — — — — 35,275 Total residential mortgage loans 775,776 106 6,923 — — 6,923 782,805 Consumer Loans Home equity 158,507 — 1,699 — — 1,699 160,206 Auto 19,540 2 38 — — 38 19,580 Marine 1,906 — 302 — — 302 2,208 Recreational vehicle 8,292 — 399 — — 399 8,691 Other 2,583 — 4 — — 4 2,587 Total consumer loans 190,828 2 2,442 — — 2,442 193,272 Total loans $ 1,367,708 $ 6,205 $ 39,592 $ — $ — $ 39,592 $ 1,413,505 Loans December 31, 2015 (Dollars in thousands) Unclassified Classified Unclassified Special Mention Substandard Doubtful Loss Total Classified Total Loans Commercial Loans Multifamily $ 75,535 $ 3,727 $ 908 $ — $ — $ 908 $ 80,170 Nonresidential 151,415 4,121 19,920 — — 19,920 175,456 Land 8,917 — 384 — — 384 9,301 Construction 38,812 — — — — — 38,812 Secured 53,801 3,037 6,344 — — 6,344 63,182 Unsecured 2,728 — 103 — — 103 2,831 Total commercial loans 331,208 10,885 27,659 — — 27,659 369,752 Residential mortgage loans One-to four-family 726,922 111 6,652 — — 6,652 733,685 Construction 40,898 — — — — — 40,898 Total residential mortgage loans 767,820 111 6,652 — — 6,652 774,583 Consumer Loans Home equity 159,371 — 1,967 — — 1,967 161,338 Auto 11,304 2 42 — — 42 11,348 Marine 2,428 — 271 — — 271 2,699 Recreational vehicle 10,157 — 499 — — 499 10,656 Other 2,206 — 11 — — 11 2,217 Total consumer loans 185,466 2 2,790 — — 2,790 188,258 Total loans $ 1,284,494 $ 10,998 $ 37,101 $ — $ — $ 37,101 $ 1,332,593 |