LOANS | 5. LOANS Portfolio loans consist of the following: December 31, December 31, 2017 2016 (Dollars in thousands) Commercial loans Multifamily $ 120,480 $ 93,597 Nonresidential 381,611 231,401 Land 15,162 8,373 Construction 116,863 68,158 Secured 177,994 95,343 Unsecured 10,506 7,386 Total commercial loans 822,616 504,258 Residential mortgage loans One-to four-family 870,939 762,926 Construction 49,092 35,695 Total residential mortgage loans 920,031 798,621 Consumer loans Home equity 195,852 165,054 Auto 64,364 39,609 Marine 1,526 1,796 Recreational vehicle 5,696 7,602 Other 6,056 2,537 Total consumer loans 273,494 216,598 Total loans 2,016,141 1,519,477 Less: Allowance for loan losses 21,202 19,087 Deferred loan fees, net (4,938 ) (3,187 ) Total 16,264 15,900 Loans, net $ 1,999,877 $ 1,503,577 Loan commitments are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses, may require payment of a fee and may expire unused. Commitments to extend credit at fixed rates expose Home Savings to some degree of interest rate risk. Home Savings evaluates each customer’s creditworthiness on a case-by-case basis. The type or amount of collateral obtained varies and is based on management’s credit evaluation of the potential borrower. Home Savings normally has a number of outstanding commitments to extend credit. December 31, 2017 2016 Fixed Rate Variable Rate Fixed Rate Variable Rate (Dollars in thousands) Commitments to make loans $ 80,741 $ 39,978 $ 74,927 $ 40,908 Undisbursed loans in process 6,779 163,903 5,450 130,566 Unused lines of credit 9,503 247,891 8,538 156,032 Terms of the commitments in both years extend up to six months, but are generally less than two months. The fixed rate loan commitments have interest rates ranging from 2.75% to 18.00%; and maturities ranging from three months to thirty years. Commitments to fund certain mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of mortgage loans to third party investors are considered derivatives. It is the Company’s practice to enter into forward commitments for the future delivery of residential mortgage loans when interest rate lock commitments are entered into in order to economically hedge the effect of changes in interest rates resulting from its commitments to fund the loans. These mortgage banking derivatives are not designated as hedge relationships. At December 31, 2017 and 2016, there were $239,000 and $1.0 million of outstanding standby letters of credit, respectively. These are issued to guarantee the performance of a customer to a third party. Standby letters of credit are generally contingent upon the failure of the customer to perform according to the terms of an underlying contract with the third party. At December 31, 2017 and 2016, there were $54.4 million and $50.5 million in outstanding commitments to fund the OverdraftPrivilege™ Program at Home Savings. With OverdraftPrivilege™, Home Savings pays non-sufficient funds checks and fees on checking accounts up to a preapproved limit. The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of December 31, 2017 and December 31, 2016 and activity for the years ended December 31, 2017, 2016 and 2015. Commercial Loans Residential Loans Consumer Loans Total (Dollars in thousands) 2017 Beginning balance $ 10,824 $ 5,538 $ 2,725 $ 19,087 Provision 2,590 1,305 358 4,253 Charge-offs (1,565 ) (1,218 ) (815 ) (3,598 ) Recoveries 693 235 532 1,460 Ending balance $ 12,542 $ 5,860 $ 2,800 $ 21,202 Period-end amount allocated to: Loans individually evaluated for impairment $ 516 $ 1,145 $ 398 $ 2,059 Loans collectively evaluated for impairment 11,971 4,715 2,402 19,088 Loans aquired with deteriorated credit quality 55 — — 55 Ending balance $ 12,542 $ 5,860 $ 2,800 $ 21,202 Period-end balances: Loans individually evaluated for impairment 3,356 16,140 6,754 26,250 Loans collectively evaluated for impairment 818,066 903,891 266,740 1,988,697 Loans aquired with deteriorated credit quality 1,194 — — 1,194 Ending balance $ 822,616 $ 920,031 $ 273,494 $ 2,016,141 Commercial Loans Residential Loans Consumer Loans Total (Dollars in thousands) 2016 Beginning balance $ 8,077 $ 6,630 $ 3,005 $ 17,712 Provision 5,611 (464 ) 240 5,387 Charge-offs (3,722 ) (761 ) (1,151 ) (5,634 ) Recoveries 858 133 631 1,622 Ending balance $ 10,824 $ 5,538 $ 2,725 $ 19,087 Period-end amount allocated to: Loans individually evaluated for impairment $ 1,271 $ 1,245 $ 500 $ 3,016 Loans collectively evaluated for impairment 9,553 4,293 2,225 16,071 Ending balance $ 10,824 $ 5,538 $ 2,725 $ 19,087 Period-end balances: Loans individually evaluated for impairment $ 6,018 $ 17,485 $ 8,045 $ 31,548 Loans collectively evaluated for impairment 498,240 781,136 208,553 1,487,929 Ending balance $ 504,258 $ 798,621 $ 216,598 $ 1,519,477 Commercial Loans Residential Loans Consumer Loans Total (Dollars in thousands) 2015 Beginning balance $ 5,690 $ 8,517 $ 3,480 $ 17,687 Provision 2,922 (974 ) 187 2,135 Charge-offs (1,268 ) (1,301 ) (1,257 ) (3,826 ) Recoveries 733 388 595 1,716 Ending balance $ 8,077 $ 6,630 $ 3,005 $ 17,712 The unpaid principal balance is the total amount of the loan that is due to the Company. 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. 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, looking back 22 quarters as of December 31, 2017. In determining the qualitative component, 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. The quantitative and qualitative components are combined to arrive at the loss factor, which is applied to the average outstanding balance of homogenous loans. At December 31, 2016, the Company evaluated 18 quarters of net charge-off history. The following table presents loans individually evaluated for impairment by class of loans for the year ended December 31, 2017: 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 $ 41 $ — $ — $ 309 $ — $ — Nonresidential 651 144 — 482 7 7 Land 716 9 — 9 — — Construction 2,467 — — — — — Secured 1,042 894 — 371 43 43 Unsecured 187 — — — — Total commercial loans 5,104 1,047 — 1,171 50 50 Residential mortgage loans One-to four-family 6,432 5,441 — 5,695 128 119 Construction — — — — — — Total residential mortgage loans 6,432 5,441 — 5,695 128 119 Consumer loans Home equity 1,399 1,059 — 1,346 21 21 Auto 29 14 — 12 1 1 Marine 553 181 — 179 1 1 Recreational vehicle 578 151 — 228 15 15 Other 3 3 — 1 — — Total consumer loans 2,562 1,408 — 1,766 38 38 Total $ 14,098 $ 7,896 $ — $ 8,632 $ 216 $ 207 With a specific allowance recorded Commercial loans Multifamily $ 422 $ 275 $ 28 $ 69 $ 4 $ 4 Nonresidential 1,455 1,423 16 1,332 110 102 Land — — — — — — Construction — — — — — — Secured 893 611 472 153 81 81 Unsecured — — — — — — Total commercial loans 2,770 2,309 516 1,554 195 187 Residential mortgage loans One-to four-family 10,874 10,699 1,145 10,792 493 448 Construction — — — — — — Total residential mortgage loans 10,874 10,699 1,145 10,792 493 448 Consumer loans Home equity 4,921 4,840 377 5,049 269 255 Auto — — — — — — Marine 100 100 1 103 5 5 Recreational vehicle 418 406 20 560 22 21 Other — — — — — — Total consumer loans 5,439 5,346 398 5,712 296 281 Total 19,083 18,354 2,059 18,058 984 916 Total impaired loans $ 33,181 $ 26,250 $ 2,059 $ 26,690 $ 1,200 $ 1,123 The following table presents loans individually evaluated for impairment by class of loans as of and for the year ended December 31, 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 $ 55 $ — $ — $ — $ — $ — Nonresidential 2,278 1,489 — 544 102 101 Land 3,922 34 — 234 — — Construction 3,594 — — — — — Secured 242 190 — 2,823 — — Unsecured 713 — — — 7 7 Total commercial loans 10,804 1,713 — 3,601 109 108 Residential mortgage loans One-to four-family 8,736 6,758 — 6,272 195 177 Construction — — — — — — Total residential mortgage loans 8,736 6,758 — 6,272 195 177 Consumer loans Home equity 2,159 1,583 — 1,382 66 64 Auto 11 3 — 7 — — Marine 585 267 — 293 1 1 Recreational vehicle 433 120 — 251 13 13 Other — — — 2 1 1 Total consumer loans 3,188 1,973 — 1,935 81 79 Total $ 22,728 $ 10,444 $ — $ 11,808 $ 385 $ 364 With a specific allowance recorded Commercial loans Multifamily $ — $ — $ — $ — $ — $ — Nonresidential 6,930 4,133 1,193 7,698 143 142 Land — — — — — — Construction — — — — — — Secured 237 172 78 654 — — Unsecured — — — — — — Total commercial loans 7,167 4,305 1,271 8,352 143 142 Residential mortgage loans One-to four-family 10,810 10,727 1,245 11,898 497 457 Construction — — — — — — Total residential mortgage loans 10,810 10,727 1,245 11,898 497 457 Consumer loans Home equity 5,390 5,335 426 6,117 310 293 Auto — — — — — — Marine 108 108 1 144 6 6 Recreational vehicle 639 629 73 691 26 26 Other — — — — — — Total consumer loans 6,137 6,072 500 6,952 342 325 Total 24,114 21,104 3,016 27,202 982 924 Total impaired loans $ 46,842 $ 31,548 $ 3,016 $ 39,010 $ 1,367 $ 1,288 The following table presents loans individually evaluated for impairment by class of loans for the year ended December 31, 2015: Impaired Loans (Dollars in thousands) Average Recorded Investment Interest Income Recognized Cash Basis Income Recognized With no specific allowance recorded Commercial loans Multifamily $ 21 $ 4 $ 4 Nonresidential 1,389 6 6 Land 474 — — Construction 69 — — Secured 3,700 — — Unsecured — — — Total commercial loans 5,653 10 10 Residential mortgage loans One-to four-family 4,710 156 149 Construction — — — Total residential mortgage loans 4,710 156 149 Consumer loans Home equity 1,491 31 29 Auto 22 — — Marine 280 2 2 Recreational vehicle 70 4 4 Other 1 — — Total consumer loans 1,864 37 35 Total $ 12,227 $ 203 $ 194 With a specific allowance recorded Commercial loans Multifamily $ 21 $ — $ — Nonresidential 5,659 119 117 Land — — — Construction 379 — — Secured 324 — — Unsecured — — — Total commercial loans 6,383 119 117 Residential mortgage loans One-to four-family 14,324 592 539 Construction — — — Total residential mortgage loans 14,324 592 539 Consumer loans Home equity 8,346 402 381 Auto 2 — — Marine 41 7 7 Recreational vehicle 783 33 33 Other 2 1 1 Total consumer loans 9,174 443 422 Total 29,881 1,154 1,078 Total impaired loans $ 42,108 $ 1,357 $ 1,272 Within secured and nonresidential impaired loans, there are two related credits with a total principal balance outstanding of $7.0 million as of December 31, 2015. 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 in 2015. In 2016, this relationship was reclassified as a nonperforming asset within other assets and is no longer included in loan balances. Home Savings believes that the asset that remains no longer represents a loan. Other than the funds held in the Receiver Estate, there are no additional assets to which Home Savings can assert a claim against as the corporate borrowers have been liquidated and dissolved, and the individual guarantors have no remaining assets. In December 2017, an appellate court ruled that a portion of the proceeds should be awarded to another claimant. Subsequently the asset was written down $2.3 million, through other expenses, to $4.1 million to reflect the court ruling. It is the Company’s intent to continue to pursue a full recovery. As a result, it is most appropriate to categorize these proceeds as a nonperforming “other asset” identified as a current receivable from the court. The Company 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 December 31, 2017 and December 31, 2016, but legal title, deed in lieu of foreclosure or similar legal agreement to the property has not yet been obtained: December 31, 2017 December 31, 2016 Unpaid Principal Balance Recorded Investment Unpaid Principal Balance Recorded Investment Mortgage loans in the process of foreclosure $ 2,588 $ 2,428 $ 3,025 $ 2,576 Consumer loans in the process of foreclosure 613 608 1,069 795 The following tables present the recorded investment in nonaccrual and loans past due over 90 days and still on accrual by class of loans as of December 31, 2017: Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing As of December 31, 2017 Nonaccrual Loans past due over 90 days and still accruing (Dollars in thousands) Commercial loans Multifamily $ 275 $ — Nonresidential 1,218 — Land 9 — Construction — — Secured 1,505 — Unsecured — — Total commercial loans 3,007 — Residential mortgage loans One-to four-family 6,076 — Construction — — Total residential mortgage loans 6,076 — Consumer Loans Home equity 2,074 — Auto 155 — Marine 181 — Recreational vehicle 208 — Other 2 — Total consumer loans 2,620 — Total nonaccrual loans and loans past due over 90 days and still accruing $ 11,703 $ — The following tables present the recorded investment in nonaccrual and loans past due over 90 days and still on accrual by class of loans as of December 31, 2016: Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing As of December 31, 2016 Nonaccrual Loans past due over 90 days and still accruing (Dollars in thousands) Commercial loans Multifamily $ — $ — Nonresidential 3,546 — Land 34 — Construction — — Secured 361 — Unsecured — — Total commercial loans 3,941 — Residential mortgage loans One-to four-family 6,084 — Construction — — Total residential mortgage loans 6,084 — Consumer Loans Home equity 1,936 — Auto 31 — Marine 267 — Recreational vehicle 178 — Other 2 — Total consumer loans 2,414 — Total nonaccrual loans and loans past due over 90 days and still accruing $ 12,439 $ — The following tables present an age analysis of past-due loans, segregated by class of loans as of December 31, 2017: 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 $ — $ — $ 275 $ 275 $ 120,205 $ 120,480 Nonresidential 20 — 1,199 1,219 380,392 381,611 Land — — 9 9 15,153 15,162 Construction — — — — 116,863 116,863 Secured 114 4 110 228 177,766 177,994 Unsecured — — — — 10,506 10,506 Total commercial loans 134 4 1,593 1,731 820,885 822,616 Residential mortgage loans One-to four-family 4,704 1,523 4,804 11,031 859,908 870,939 Construction — — — — 49,092 49,092 Total residential mortgage loans 4,704 1,523 4,804 11,031 909,000 920,031 Consumer Loans: Home equity 1,184 120 1,793 3,097 192,755 195,852 Automobile 187 100 82 369 63,995 64,364 Marine — — 181 181 1,345 1,526 Recreational vehicle 47 — 165 212 5,484 5,696 Other 31 3 2 36 6,020 6,056 Total consumer loans 1,449 223 2,223 3,895 269,599 273,494 Total loans $ 6,287 $ 1,750 $ 8,620 $ 16,657 $ 1,999,484 $ 2,016,141 The following tables present an age analysis of past-due loans, segregated by class of loans as of December 31, 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 $ — $ — $ — $ — $ 93,597 $ 93,597 Nonresidential 3,511 — 61 3,572 227,829 231,401 Land — — 34 34 8,339 8,373 Construction — — — — 68,158 68,158 Secured — — 361 361 94,982 95,343 Unsecured — — — — 7,386 7,386 Total commercial loans 3,511 — 456 3,967 500,291 504,258 Residential mortgage loans One-to four-family 3,774 1,717 5,461 10,952 751,974 762,926 Construction — — — — 35,695 35,695 Total residential mortgage loans 3,774 1,717 5,461 10,952 787,669 798,621 Consumer Loans: Home equity 941 458 1,669 3,068 161,986 165,054 Automobile 130 — 3 133 39,476 39,609 Marine — — 267 267 1,529 1,796 Recreational vehicle 131 347 — 478 7,124 7,602 Other 1 3 2 6 2,531 2,537 Total consumer loans 1,203 808 1,941 3,952 212,646 216,598 Total loans $ 8,488 $ 2,525 $ 7,858 $ 18,871 $ 1,500,606 $ 1,519,477 The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 2017: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (In thousands) Commercial loans Multifamily — $ — $ — Nonresidential 2 1,379 1,379 Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans 2 1,379 1,379 Residential mortgage loans One-to four-family 3 309 350 Construction — — — Total residential mortgage loans 3 309 350 Consumer loans Home equity — — — Auto — — — Marine — — — Recreational vehicle 1 115 115 Other — — — Total consumer loans 1 115 115 Total restructured loans 6 $ 1,803 $ 1,844 The TDRs described above increased the allowance for loan losses by $7,000, and resulted in no charge-offs during the twelve months ended December 31, 2017. The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 2016: Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Recorded Investment (Dollars in thousands) Commercial loans Multifamily — $ — $ — Nonresidential 4 6,134 6,140 Land — — — Construction — — — Secured — — — Unsecured — — — Total commercial loans 4 6,134 6,140 Residential mortgage loans One-to four-family 8 812 853 Construction — — — Total residential mortgage loans 8 812 853 Consumer loans Home equity 4 178 182 Auto — — — Marine — — — Recreational vehicle — — — Other — — — Total consumer loans 4 178 182 Total restructured loans 16 $ 7,124 $ 7,175 The TDRs described above increased the allowance for loan losses by $39,000, and resulted in no charge-offs during the twelve months ended December 31, 2016. The following table presents loans by class modified as TDRs that occurred during the year ended December 31, 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 14 1,283 1,337 Construction — — — Total residential mortgage loans 14 1,283 1,337 Consumer loans Home equity 14 844 845 Auto — — — Marine — — — Recreational vehicle — — — Other 1 28 8 Total consumer loans 15 872 853 Total restructured loans 29 $ 2,155 $ 2,190 The TDRs described above increased the allowance for loan losses by $135,000, and resulted in no of charge-offs during the twelve months ended December 31, 2015. During the periods ended December 31, 2017, 2016 and 2015, the terms of certain loans were modified as TDRs. The modification of the terms of such loans included one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of a loan were for periods ranging from six months to 2 years. Modifications involving an extension of the maturity date were for periods ranging from six months to ten years. As of December 31, 2017 and December 31, 2016, the Company has a recorded investment in troubled debt restructurings of $19.8 million and $26.6 million, respectively. The Company has allocated $1.6 million of specific reserves to customers whose loan terms were modified in TDRs as of December 31, 2017. The Company had allocated $3.0 million of specific reserves to customers whose loan terms were modified in troubled debt restructurings as of December 31, 2016. The Company committed to lend additional amounts totaling up to $37,000 and $31,000 at December 31, 2017 and December 31, 2016, respectively. TDR loans that were on nonaccrual status aggregated $2.4 million and $6.6 million at December 31, 2017 and December 31, 2016, respectively. Such loans are considered nonperforming loans. TDR loans that were accruing according to their terms aggregated $17.9 million and $20.0 million at December 31, 2017 and December 31, 2016, respectively. There were no loans modified as TDRs for which there was a payment default within twelve months following the modification during the period ended December 31, 2017. A TDR is considered to be in payment default once it is 30 days contractually past due under the modified terms. The terms of certain other loans were modified during the period ended December 31, 2017, but they did not meet the definition of a TDR. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant. The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the period ended December 31, 2016: Number of loans Recorded Investment (Dollars in thousands) Commercial loans Multifamily — $ — Nonresidential 1 3,603 Land — — Construction — — Secured — — Unsecured — — Total commercial loans 1 3,603 Residential mortgage loans One-to four-family 1 3 Construction — — Total residential mortgage loans 1 3 Consumer loans Home equity — — Auto — — Marine — — Recreational vehicle — — Other — — Total consumer loans — — Total restructured loans 2 $ 3,606 The TDRs that subsequently defaulted described above resulted in $350,000 charge-offs during the twelve months ended December 31, 2016, and an $820,000 increase in the provision for loan losses. The TDR’s described above were resolved in January 2017, and are no longer in the Company’s loan portfolio. The terms of certain other loans were modified during the period ended December 31, 2016, but they did not meet the definition of a TDR. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant. The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the period ended December 31, 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 2 29 Construction — — Total residential mortgage loans 2 29 Consumer loans Home equity 1 40 Auto — — Marine — — Recreational vehicle — — Other 1 8 Total consumer loans 2 48 Total restructured loans 4 $ 77 The TDRs that subsequently defaulted described above resulted in no charge-offs during the twelve months ended December 31, 2015, and had no effect on the provision for loan losses. The terms of certain other loans were modified during the period ended December 31, 2015, but they did not meet the definition of a TDR. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant. 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, 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. Loans may be housed in this category for no longer than 12 months during which time information is obtained to determine if the credit should be downgraded to the substandard category. 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 December 31, 2017 and December 31, 2016, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows: December 31, 2017 (Dollars in thousands) Unclassified Classified Unclassified Special Mention Substandard Doubtful Loss Total Classified Total Loans Commercial Loans Multifamily $ 118,716 $ 1,334 $ 430 $ — $ — $ 430 $ 120,480 Nonresidential 367,553 6,394 7,664 — — 7,664 381,611 Land 15,153 — 9 — — 9 15,162 Construction 116,460 403 — — — — 116,863 Secured 149,912 6,092 21,990 — — 21,990 177,994 Unsecured 10,412 — 94 — — 94 10,506 Total commercial loans 778,206 14,223 30,187 — — 30,187 822,616 Residential mortgage loans One-to four-family 861,971 1,585 7,383 — — 7,383 870,939 Construction 49,092 — — — — — 49,092 Total residential mortgage loans 911,063 1,585 7,383 — — 7,383 920,031 Consumer Loans Home equity 193,733 — 2,119 — — 2,119 195,852 Auto 64,209 — 155 — — 155 64,364 Marine 1,345 — 181 — — 181 1,526 Recreational vehicle 5,488 — 208 — — 208 5,696 Other 6,051 — 5 — — 5 6,056 Total consumer loans 270,826 — 2,668 — — 2,668 273,494 Total loans $ 1,960,095 $ 15,808 $ 40,238 $ — $ — $ 40,238 $ 2,016,141 December 31, 2016 (Dollars in thousands) Unclassified Classified Unclassified Special Mention Substandard Doubtful Loss Total Classified Total Loans Commercial Loans Multifamily $ 89,468 $ 3,564 $ 565 $ — $ — $ 565 $ 93,597 Nonresidential 217,204 6,037 8,160 — — 8,160 231,401 Land 8,339 — 34 — — 34 8,373 Construction 68,158 — — — — — 68,158 Secured 89,756 3,420 2,167 — — 2,167 95,343 Unsecured 7,291 — 95 — — 95 7,386 Total commercial loans 480,216 13,021 11,021 — — 11,021 504,258 Residential mortgage loans One-to four-family 754,996 104 7,826 — — 7,826 762,926 Construction 35,695 — — — — — 35,695 Total residential mortgage loans 790,691 104 7,826 — — 7,826 798,621 Consumer Loans Home equity 163,101 — 1,953 — — 1,953 165,054 Auto 39,577 1 31 — — 31 39,609 Marine 1,530 — 266 — — 266 1,796 Recreational vehicle 7,424 — 178 — — 178 7,602 Other 2,535 — 2 — — 2 2,537 Total consumer loans 214,167 1 2,430 — — 2,430 216,598 Total loans $ 1,485,074 $ 13,126 $ 21,277 $ — $ — $ 21,277 $ 1,519,477 Directors and officers of the Company are loan customers in the ordinary course of business. The following describes loans to officers and/or directors of the Company: (Dollars in thousands) Balance as of December 31, 2016 $ 927 New loans to officers and/or directors 7,532 Loan payments during 2017 (89 ) Increase due to changes in officers and/or directors 189 Balance as of December 31, 2017 $ 8,559 Purchased Credit Impaired Loans: The Company has purchased loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The carrying amount of those loans is as follows: December 31, 2017 (Dollars in thousands) Commercial loans $ 1,194 Residential mortgage loans — Consumer loans — Outstanding balance $ 1,194 Carrying amount, net of allowance of $55 $ 1,139 Accretable yield, or income expected to be collected, is as follows: Year Ended December 31, 2017 (Dollars in thousands) Beginning of period $ — New loans purchased 158 Accretion of income 64 Balance at December 31 $ 94 For the purchased credit impaired loans disclosed above, there was an increase of $55,000 in the allowance for loan losses for the year ended December 31, 2017 . Purchased credit impaired loans purchased during the year ended December 31, 2017 for which it was probable at acquisition that all contractually required payments would not be collected are as follows: December 31, 2017 (Dollars in thousands) Contractually required payments receivable of loans purchased during the year: Commercia |