LOANS | 5. LOANS Portfolio loans consist of the following: September 30, December 31, 2016 2015 (Dollars in thousands) Commercial loans Multifamily $ 107,066 $ 80,170 Nonresidential 225,699 175,456 Land 9,401 9,301 Construction 45,137 38,812 Secured 96,331 63,182 Unsecured 10,549 2,831 Total commercial loans 494,183 369,752 Residential mortgage loans One-to four-family 755,893 733,685 Construction 35,875 40,898 Total residential mortgage loans 791,768 774,583 Consumer loans Home equity 162,979 161,338 Auto 28,269 11,348 Marine 1,859 2,699 Recreational vehicle 8,199 10,656 Other 2,545 2,217 Total consumer loans 203,851 188,258 Total loans 1,489,802 1,332,593 Less: Allowance for loan losses 18,234 17,712 Deferred loan costs, net (2,381 ) (1,311 ) Total 15,853 16,401 Loans, net $ 1,473,949 $ 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 September 30, 2016 and December 31, 2015 and activity for the three and nine months ended September 30, 2016 and 2015. Allowance For Loan Losses Commercial Loans Residential Loans Consumer Loans Total (Dollars in thousands) For the three months ended September 30, 2016 Beginning balance $ 8,958 $ 5,644 $ 2,570 $ 17,172 Provision 842 268 234 1,344 Charge-offs (533 ) (166 ) (222 ) (921 ) Recoveries 527 20 92 639 Ending balance $ 9,794 $ 5,766 $ 2,674 $ 18,234 For the nine months ended September 30, 2016 Beginning balance $ 8,077 $ 6,630 $ 3,005 $ 17,712 Provision (recovery) 4,055 (359 ) 198 3,894 Charge-offs (3,026 ) (612 ) (977 ) (4,615 ) Recoveries 688 107 448 1,243 Ending balance $ 9,794 $ 5,766 $ 2,674 $ 18,234 September 30, 2016 Period-end amount allocated to: Loans individually evaluated for impairment $ 1,016 $ 1,342 $ 516 $ 2,874 Loans collectively evaluated for impairment 8,778 4,424 2,158 15,360 Ending balance $ 9,794 $ 5,766 $ 2,674 $ 18,234 Period-end balances: Loans individually evaluated for impairment $ 13,697 $ 17,848 $ 8,708 $ 40,253 Loans collectively evaluated for impairment 480,486 773,920 195,143 1,449,549 Ending balance $ 494,183 $ 791,768 $ 203,851 $ 1,489,802 Allowance For Loan Losses Commercial Loans Residential Loans Consumer Loans Total For the three months ended September 30, 2015 Beginning balance $ 6,389 $ 7,082 $ 3,410 $ 16,881 Provision (recovery) 1,375 (348 ) (354 ) 673 Charge-offs (252 ) (83 ) (178 ) (513 ) Recoveries 189 66 186 441 Ending balance $ 7,701 $ 6,717 $ 3,064 $ 17,482 For the nine months ended September 30, 2015 Beginning balance $ 5,690 $ 8,517 $ 3,480 $ 17,687 Provision (recovery) 2,548 (1,498 ) 192 1,242 Charge-offs (1,047 ) (576 ) (1,068 ) (2,691 ) Recoveries 510 274 460 1,244 Ending balance $ 7,701 $ 6,717 $ 3,064 $ 17,482 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 September 30, 2016, the Company evaluated 17 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 nine months ended September 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 $ 59 $ — $ — $ — $ — $ — Nonresidential 952 149 — 248 4 4 Land 3,922 134 — 322 — — Construction 3,594 — — — — — Secured 3,743 3,700 — 3,700 — — Unsecured 821 — — — 7 7 Total commercial loans 13,091 3,983 — 4,270 11 11 Residential mortgage loans One-to four-family 7,401 5,727 — 6,049 55 49 Construction — — — — — — Total residential mortgage loans 7,401 5,727 — 6,049 55 49 Consumer loans Home equity 1,728 1,272 — 1,415 14 14 Auto 13 8 — 10 — — Marine 543 301 — 294 — — Recreational vehicle 637 322 — 241 4 4 Other — — — 3 — — Total consumer loans 2,921 1,903 — 1,963 18 18 Total $ 23,413 $ 11,613 $ — $ 12,282 $ 84 $ 78 With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — $ — $ — $ — Nonresidential 11,660 9,164 935 7,911 208 206 Land — — — — — — Construction — — — — — — Secured 616 550 81 692 — — Unsecured — — — — — — Total commercial loans 12,276 9,714 1,016 8,603 208 206 Residential mortgage loans One-to four-family 12,123 12,121 1,342 12,587 423 373 Construction — — — — — — Total residential mortgage loans 12,123 12,121 1,342 12,587 423 373 Consumer loans Home equity 5,997 5,997 435 6,592 257 238 Auto — — — — — — Marine 153 153 4 158 6 4 Recreational vehicle 655 655 77 815 20 19 Other — — — 2 — — Total consumer loans 6,805 6,805 516 7,567 283 261 Total 31,204 28,640 2,874 28,757 914 840 Total impaired loans $ 54,617 $ 40,253 $ 2,874 $ 41,039 $ 998 $ 918 The following tables present loans individually evaluated for impairment by class of loans as of and for nine months ended September 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 $ 169 $ — $ — $ 43 $ 4 $ 4 Nonresidential 1,780 369 — 2,708 5 5 Land 3,922 484 — 511 — — Construction 1,126 — — 116 — — Secured 3,890 3,700 — 3,701 — — Unsecured 1,248 — — — — — Total commercial loans 12,135 4,553 — 7,079 9 9 Residential mortgage loans One-to four-family 5,374 3,914 — 4,373 56 50 Construction — — — — — — Total residential mortgage loans 5,374 3,914 — 4,373 56 50 Consumer loans Home equity 1,709 1,179 — 1,377 14 12 Auto 27 19 — 28 — — Marine 499 273 — 250 2 2 Recreational vehicle 94 65 — 70 2 2 Other — — — — — — Total consumer loans 2,329 1,536 — 1,725 18 16 Total $ 19,838 $ 10,003 $ — $ 13,177 $ 83 $ 75 With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — $ 23 $ — $ — Nonresidential 5,324 5,144 584 5,303 101 99 Land — — — — — — Construction 2,815 327 42 595 — — Secured 324 324 3 324 — — Unsecured — — — — — — Total commercial loans 8,463 5,795 629 6,245 101 99 Residential mortgage loans One-to four-family 14,390 14,390 1,596 14,626 497 439 Construction — — — — — — Total residential mortgage loans 14,390 14,390 1,596 14,626 497 439 Consumer loans Home equity 8,336 8,336 628 8,931 344 321 Auto — — — 4 — — Marine — — — — — — Recreational vehicle 589 589 117 685 9 9 Other — — — — — — Total consumer loans 8,925 8,925 745 9,620 353 330 Total 31,778 29,110 2,970 30,491 951 868 Total impaired loans $ 51,616 $ 39,113 $ 2,970 $ 43,668 $ 1,034 $ 943 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 September 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 238 1 1 Land 259 — — Construction — — — Secured 3,700 — — Unsecured — — — Total commercial loans 4,197 1 1 Residential mortgage loans One-to four-family 6,125 19 19 Construction — — — Total residential mortgage loans 6,125 19 19 Consumer loans Home equity 1,306 9 9 Auto 9 — — Marine 302 — — Recreational vehicle 298 1 1 Other 2 — — Total consumer loans 1,917 10 10 Total $ 12,239 $ 30 $ 30 With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — Nonresidential 8,868 84 84 Land — — — Construction — — — Secured 742 — — Unsecured — — — Total commercial loans 9,610 84 84 Residential mortgage loans One-to four-family 12,077 132 127 Construction — — — Total residential mortgage loans 12,077 132 127 Consumer loans Home equity 6,138 77 76 Auto — — — Marine 155 2 2 Recreational vehicle 724 6 6 Other — — — Total consumer loans 7,017 85 84 Total 28,704 301 295 Total impaired loans $ 40,943 $ 331 $ 325 The following tables present loans individually evaluated for impairment by class of loans as of and for the three months ended September 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 $ — $ 1 $ 1 Nonresidential 1,400 1 1 Land 490 — Construction 44 — — Secured 3,700 — — Unsecured — — — Total commercial loans 5,634 2 2 Residential mortgage loans One-to four-family 4,163 26 24 Construction — — — Total residential mortgage loans 4,163 26 24 Consumer loans Home equity 1,284 4 4 Auto 21 — — Marine 279 — — Recreational vehicle 66 1 — Other — — — Total consumer loans 1,650 5 4 Total $ 11,447 $ 33 $ 30 With a specific allowance recorded Commercial loans Multifamily $ 43 $ — $ — Nonresidential 5,643 26 26 Land — — — Construction 327 — — Secured 324 — — Unsecured — — — Total commercial loans 6,337 26 26 Residential mortgage loans One-to four-family 14,609 173 166 Construction — — — Total residential mortgage loans 14,609 173 166 Consumer loans Home equity 8,445 117 116 Auto 2 — — Marine — — — Recreational vehicle 647 — — Other — — — Total consumer loans 9,094 117 116 Total 30,040 316 308 Total impaired loans $ 41,487 $ 349 $ 338 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 $6.9 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 September 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: September 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 $ 3,142 $ 2,862 $ 1,294 $ 1,162 Consumer loans in process of foreclosure 1,306 1,098 845 643 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 September 30, 2016: Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing As of September 30, 2016 Nonaccrual Loans past due over 90 days and still accruing (Dollars in thousands) Commercial loans Multifamily $ — $ — Nonresidential 6,879 — Land 134 — Construction — — Secured 4,242 — Unsecured — — Total commercial loans 11,255 — Residential mortgage loans One-to four-family 5,835 — Construction — — Total residential mortgage loans 5,835 — Consumer Loans Home equity 1,767 — Auto 17 — Marine 244 — Recreational vehicle 327 — Other 3 — Total consumer loans 2,358 — Total nonaccrual loans and loans past due over 90 days and still accruing $ 19,448 $ — 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 September 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 $ — $ — $ — $ — $ 107,066 $ 107,066 Nonresidential 27 — 3,415 3,442 222,257 225,699 Land — — 134 134 9,267 9,401 Construction — — — — 45,137 45,137 Secured — — 4,242 4,242 92,089 96,331 Unsecured — — — — 10,549 10,549 Total commercial loans 27 — 7,791 7,818 486,365 494,183 Residential mortgage loans One-to four-family 3,669 1,195 5,509 10,373 745,520 755,893 Construction — — — — 35,875 35,875 Total residential mortgage loans 3,669 1,195 5,509 10,373 781,395 791,768 Consumer Loans: Home equity 926 261 1,552 2,739 160,240 162,979 Automobile — 7 5 12 28,257 28,269 Marine 43 — 244 287 1,572 1,859 Recreational vehicle 246 82 246 574 7,625 8,199 Other 2 1 3 6 2,539 2,545 Total consumer loans 1,217 351 2,050 3,618 200,233 203,851 Total loans $ 4,913 $ 1,546 $ 15,350 $ 21,809 $ 1,467,993 $ 1,489,802 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 September 30, 2016 and December 31, 2015, the Company has a recorded investment in troubled debt restructurings of $28.0 million and $26.3 million, respectively. The Company allocated $2.3 million of specific allowance for those loans at September 30, 2016 and December 31, 2015. The Company has committed to lend additional amounts totaling up to $31,000 and $42,000 at September 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 September 30, 2016: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (In thousands) Commercial loans Multifamily — $ — $ — Nonresidential 1 1,371 1,377 Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans 1 1,371 1,377 Residential mortgage loans One-to four-family 1 113 114 Construction — — — Total residential mortgage loans 1 113 114 Consumer loans Home equity — — — Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans — — — Total restructured loans 2 $ 1,484 $ 1,491 The troubled debt restructurings described above increased the allowance for loan losses by $20,000 and resulted in no The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2016: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (In thousands) Commercial loans Multifamily — $ — $ — Nonresidential 3 5,459 5,465 Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans 3 5,459 5,465 Residential mortgage loans One-to four-family 4 429 449 Construction — — — Total residential mortgage loans 4 429 449 Consumer loans Home equity 3 130 134 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 3 130 134 Total restructured loans 10 $ 6,018 $ 6,048 The troubled debt restructurings described above increased the allowance for loan losses by $31,000 and resulted in no The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended September 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 2 156 189 Construction — — — Total residential mortgage loans 2 156 189 Consumer loans Home equity 5 178 178 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 5 178 178 Total restructured loans 7 $ 334 $ 367 The troubled debt restructurings described above increased the allowance for loan losses by $21,000, and resulted in no chargeoffs during the three months ended September 30, 2015. The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 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 12 1,066 1,119 Construction — — — Total residential mortgage loans 12 1,066 1,119 Consumer loans Home equity 11 660 661 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 11 660 661 Total restructured loans 23 $ 1,726 $ 1,780 The troubled debt restructurings described above increased the allowance for loan losses by $103,000 and resulted in no chargeoffs during the nine months ended September 30, 2015. 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 September 30, 2016. 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 4 Construction — — Total residential mortgage loans 1 4 Consumer loans Home equity — — Auto — — Marine — — Recreational vehicle — — Other — — Total consumer loans — — Total restructured loans 1 $ 4 The troubled debt restructurings that subsequently defaulted described above resulted in no charge-offs during the three and nine months ended September 30, 2016, and had no effect on the provision for loan losses. 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 September 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 — — Construction — — Total residential mortgage loans — — Consumer loans Home equity 2 52 Auto — — Marine — — Recreational vehicle — — Other — — Total consumer loans 2 52 Total restructured loans 2 $ 52 The troubled debt restructurings that subsequently defaulted described above resulted in no charge-offs during the three and nine months ended September 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 September 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 September 30, 2016 (Dollars in thousands) Unclassified Classified Unclassified Special Mention Substandard Doubtful Loss Total Classified Total Loans Commercial Loans Multifamily $ 102,892 $ 3,604 $ 570 $ — $ — $ 570 $ 107,066 Nonresidential 206,356 5,826 13,517 — — 13,517 225,699 Land 9,267 — 134 — — 134 9,401 Construction 45,137 — — — — — 45,137 Secured 86,858 237 9,236 — — 9,236 96,331 Unsecured 10,454 — 95 — — 95 10,549 Total commercial loans 460,964 9,667 23,552 — — 23,552 494,183 Residential mortgage loans One-to four-family 748,808 105 6,980 — — 6,980 755,893 Construction 35,875 — — — — — 35,875 Total residential mortgage loans 784,683 105 6,980 — — 6,980 791,768 Consumer Loans Home equity 161,088 — 1,891 — — 1,891 162,979 Auto 28,249 2 18 — — 18 28,269 Marine 1,558 — 301 — — 301 1,859 Recreational vehicle 7,855 — 344 — — 344 8,199 Other 2,541 — 4 — — 4 2,545 Total consumer loans 201,291 2 2,558 — — 2,558 203,851 Total loans $ 1,446,938 $ 9,774 $ 33,090 $ — $ — $ 33,090 $ 1,489,802 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 |