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Loans Held For Investment | 9 Months Ended
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Mar. 31, 2016
Loans and Leases Receivable Disclosure [Abstract] |
Loans Held For Investment | Loans Held for Investment Loans held for investment, net of fair value adjustments, consisted of the following:
(In Thousands) | March 31, 2016 | June 30, 2015
Mortgage loans: |  |
Single-family | $ | 335,797 |  | $ | 365,961 |
Multi-family | 378,871 |  | 347,020 |
Commercial real estate | 93,384 |  | 100,897 |
Construction | 9,679 |  | 8,191 |
Other | 72 |  | — |
Commercial business loans | 452 |  | 666 |
Consumer loans | 230 |  | 244 |
Total loans held for investment, gross | 818,485 |  | 822,979 |
Undisbursed loan funds | (8,648 | ) | (3,360 | )
Advance payments of escrows | 247 |  | 199 |
Deferred loan costs, net | 3,683 |  | 3,140 |
Allowance for loan losses | (8,200 | ) | (8,724 | )
Total loans held for investment, net | $ | 805,567 |  | $ | 814,234 |
As of March 31, 2016, the Corporation had $10.3 million in mortgage loans that are subject to negative amortization, consisting of $7.0 million in multi-family loans, $3.1 million in single-family loans and $184,000 in commercial real estate loans. This compares to $14.1 million of negative amortization mortgage loans at June 30, 2015, consisting of $10.7 million in multi-family loans, $3.2 million in single-family loans and $227,000 in commercial real estate loans. During the third quarters and nine months of fiscal 2016 and 2015, no loan interest income was added to the negative amortization loan balance. Negative amortization involves a greater risk to the Corporation because the loan principal balance may increase by a range of 110% to 115% of the original loan amount during the period of negative amortization and because the loan payment may increase beyond the means of the borrower when loan principal amortization is required. Also, the Corporation has originated interest-only ARM loans, which typically have a fixed interest rate for the first two to five years coupled with an interest only payment, followed by a periodic adjustable rate and a fully amortizing loan payment. As of March 31, 2016 and June 30, 2015, the interest-only ARM loans were $88.0 million and $152.6 million, or 10.8% and 18.6% of loans held for investment, respectively. As of March 31, 2016, the Corporation had $4.6 million of single-family loans, 19 loans, held for investment which were originated for sale but were subsequently transferred to loans held for investment and are carried at fair value. This compares to $4.5 million of single-family loans, 13 loans, held for investment at June 30, 2015 which were originated for sale but were subsequently transferred to loans held for investment and are carried at fair value. The following table sets forth information at March 31, 2016 regarding the dollar amount of loans held for investment that are contractually repricing during the periods indicated, segregated between adjustable rate loans and fixed rate loans. Fixed-rate loans comprised 3% of loans held for investment at March 31, 2016, as compared to 4% at June 30, 2015. Adjustable rate loans having no stated repricing dates that reprice when the index they are tied to reprices (e.g. prime rate index) and checking account overdrafts are reported as repricing within one year. The table does not include any estimate of prepayments which may cause the Corporation’s actual repricing experience to differ materially from that shown.
| Adjustable Rate |  |
(In Thousands) | Within One Year | After One Year Through 3 Years | After 3 Years Through 5 Years | After 5 Years Through 10 Years | Fixed Rate | Total
Mortgage loans: |  |  |  |  |  |
Single-family | $ | 257,665 |  | $ | 7,121 |  | $ | 56,836 |  | $ | 679 |  | $ | 13,496 |  | $ | 335,797 |
Multi-family | 68,092 |  | 127,701 |  | 174,233 |  | 5,827 |  | 3,018 |  | 378,871 |
Commercial real estate | 6,604 |  | 40,493 |  | 42,745 |  | — |  | 3,542 |  | 93,384 |
Construction | 7,034 |  | — |  | — |  | — |  | 2,645 |  | 9,679 |
Other | — |  | — |  | — |  | — |  | 72 |  | 72 |
Commercial business loans | 114 |  | — |  | — |  | — |  | 338 |  | 452 |
Consumer loans | 226 |  | — |  | — |  | — |  | 4 |  | 230 |
Total loans held for investment, gross | $ | 339,735 |  | $ | 175,315 |  | $ | 273,814 |  | $ | 6,506 |  | $ | 23,115 |  | $ | 818,485 |
The Corporation has developed an internal loan grading system to evaluate and quantify the Bank’s loans held for investment portfolio with respect to quality and risk. Management continually evaluates the credit quality of the Corporation’s loan portfolio and conducts a quarterly review of the adequacy of the allowance for loan losses using quantitative and qualitative methods. The Corporation has adopted an internal risk rating policy in which each loan is rated for credit quality with a rating of pass, special mention, substandard, doubtful or loss. The two primary components that are used during the loan review process to determine the proper allowance levels are individually evaluated allowances and collectively evaluated allowances. Quantitative loan loss factors are developed by determining the historical loss experience, expected future cash flows, discount rates and collateral fair values, among others. Qualitative loan loss factors are developed by assessing general economic indicators such as gross domestic product, retail sales, unemployment rates, employment growth, California home sales and median California home prices. The Corporation assigns individual factors for the quantitative and qualitative methods for each loan category and each internal risk rating. The Corporation categorizes all of the loans held for investment into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:
▪ | Pass - These loans range from minimal credit risk to average, but still acceptable, credit risk. The likelihood of loss is considered remote.
▪ | Special Mention - A Special Mention asset has potential weaknesses that may be temporary or, if left uncorrected, may result in a loss. While concerns exist, the bank is currently protected and loss is considered unlikely and not imminent.
▪ | Substandard - A substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
▪ | Doubtful - A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.
▪ | Loss - A loss loan is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted.
The following tables summarize gross loans held for investment, net of fair value adjustments, by loan types and risk category at the dates indicated:
|  | March 31, 2016
(In Thousands) | Single-family | Multi-family | Commercial Real Estate | Construction | Other Mortgage | Commercial Business | Consumer | Total
Pass | $ | 319,385 |  | $ | 375,537 |  | $ | 92,465 |  | $ | 9,679 |  | $ | 72 |  | $ | 354 |  | $ | 230 |  | $ | 797,722 |
Special Mention | 5,754 |  | 930 |  | — |  | — |  | — |  | — |  | — |  | 6,684 |
Substandard | 10,658 |  | 2,404 |  | 919 |  | — |  | — |  | 98 |  | — |  | 14,079 |
| Total loans held for investment, gross | $ | 335,797 |  | $ | 378,871 |  | $ | 93,384 |  | $ | 9,679 |  | $ | 72 |  | $ | 452 |  | $ | 230 |  | $ | 818,485 |
|  | June 30, 2015
(In Thousands) | Single-family | Multi-family | Commercial Real Estate | Construction | Commercial Business | Consumer | Total
Pass | $ | 347,301 |  | $ | 339,093 |  | $ | 98,254 |  | $ | 8,191 |  | $ | 557 |  | $ | 244 |  | $ | 793,640 |
Special Mention | 7,766 |  | 413 |  | — |  | — |  | — |  | — |  | 8,179 |
Substandard | 10,894 |  | 7,514 |  | 2,643 |  | — |  | 109 |  | — |  | 21,160 |
| Total loans held for investment, gross | $ | 365,961 |  | $ | 347,020 |  | $ | 100,897 |  | $ | 8,191 |  | $ | 666 |  | $ | 244 |  | $ | 822,979 |
The allowance for loan losses is maintained at a level sufficient to provide for estimated losses based on evaluating known and inherent risks in the loans held for investment and upon management’s continuing analysis of the factors underlying the quality of the loans held for investment. These factors include changes in the size and composition of the loans held for investment, actual loan loss experience, current economic conditions, detailed analysis of individual loans for which full collectability may not be assured, and determination of the realizable value of the collateral securing the loans. The provision (recovery) for (from) the allowance for loan losses is charged (credited) against operations on a quarterly basis, as necessary, to maintain the allowance at appropriate levels. Although management believes it uses the best information available to make such determinations, there can be no assurance that regulators, in reviewing the Corporation’s loans held for investment, will not request a significant increase in its allowance for loan losses. Future adjustments to the allowance for loan losses may be necessary and results of operations could be significantly and adversely affected as a result of economic, operating, regulatory, and other conditions beyond the Corporation’s control. Non-performing loans are charged-off to their fair market values in the period the loans, or portion thereof, are deemed uncollectible, generally after the loan becomes 150 days delinquent for real estate secured first trust deed loans and 120 days delinquent for commercial business or real estate secured second trust deed loans. For loans that were modified from their original terms, were re-underwritten and identified in the Corporation’s asset quality reports as troubled debt restructurings (“restructured loans”), the charge-off occurs when the loan becomes 90 days delinquent; and where borrowers file bankruptcy, the charge-off occurs when the loan becomes 60 days delinquent. The amount of the charge-off is determined by comparing the loan balance to the estimated fair value of the underlying collateral, less disposition costs, with the loan balance in excess of the estimated fair value charged-off against the allowance for loan losses. The allowance for loan losses for non-performing loans is determined by applying Accounting Standards Codification (“ASC”) 310, “Receivables.” For restructured loans that are less than 90 days delinquent, the allowance for loan losses are segregated into (a) individually evaluated allowances for those loans with applicable discounted cash flow calculations still in their restructuring period, classified lower than pass, and containing an embedded loss component or (b) collectively evaluated allowances based on the aggregated pooling method. For non-performing loans less than 60 days delinquent where the borrower has filed bankruptcy, the collectively evaluated allowances are assigned based on the aggregated pooling method. For non-performing commercial real estate loans, an individually evaluated allowance is derived based on the loan's discounted cash flow fair value (for restructured loans) or collateral fair value less estimated selling costs and if the fair value is higher than the loan balance, no allowance is required. The following table summarizes the Corporation’s allowance for loan losses at March 31, 2016 and June 30, 2015:
(In Thousands) | March 31, 2016 | June 30, 2015
Collectively evaluated for impairment: |  |
Mortgage loans: |  |
Single-family | $ | 5,507 |  | $ | 5,202 |
Multi-family | 1,898 |  | 2,616 |
Commercial real estate | 741 |  | 734 |
Construction | 10 |  | 42 |
Other | 1 |  | — |
Commercial business loans | 15 |  | 23 |
Consumer loans | 8 |  | 9 |
Total collectively evaluated allowance | 8,180 |  | 8,626 |
Individually evaluated for impairment: |  |
Mortgage loans: |  |
Single-family | — |  | 78 |
Commercial business loans | 20 |  | 20 |
Total individually evaluated allowance | 20 |  | 98 |
Total loan loss allowance | $ | 8,200 |  | $ | 8,724 |
The following table is provided to disclose additional details on the Corporation’s allowance for loan losses:
| For the Quarters Ended March 31, | For the Nine Months Ended March 31,
(Dollars in Thousands) | 2016 | 2015 | 2016 | 2015
Allowance at beginning of period | $ | 8,768 |  | $ | 8,693 |  | $ | 8,724 |  | $ | 9,744 |
Recovery from the allowance for loan losses | (694 | ) | (111 | ) | (1,094 | ) | (1,283 | )
Recoveries: |  |  |  |  |  |  |  |
Mortgage loans: |  |  |  |  |  |  |  |
Single-family | 129 |  | 226 |  | 356 |  | 499 |
Multi-family | 53 |  | 65 |  | 167 |  | 229 |
Commercial real estate | — |  | — |  | 216 |  | — |
Commercial business loans | — |  | — |  | 85 |  | — |
Consumer loans | 1 |  | — |  | 1 |  | 1 |
Total recoveries | 183 |  | 291 |  | 825 |  | 729 |
Charge-offs: |  |  |  |  |  |  |  |
Mortgage loans: |  |  |  |  |  |  |  |
Single-family | (57 | ) | (88 | ) | (253 | ) | (405 | )
Commercial real estate | — |  | (73 | ) | — |  | (73 | )
Consumer loans | — |  | — |  | (2 | ) | — |
Total charge-offs | (57 | ) | (161 | ) | (255 | ) | (478 | )
Net recoveries | 126 |  | 130 |  | 570 |  | 251 |
Balance at end of period | $ | 8,200 |  | $ | 8,712 |  | $ | 8,200 |  | $ | 8,712 |
Allowance for loan losses as a percentage of gross loans held for investment | 1.01 | % | 1.05 | % | 1.01 | % | 1.05 | %
Net recoveries as a percentage of average loans receivable, net, during the period (annualized) | (0.05 | )% | (0.05 | )% | (0.08 | )% | (0.04 | )%
Allowance for loan losses as a percentage of gross non-performing loans at the end of the period | 62.31 | % | 79.74 | % | 62.31 | % | 79.74 | %
The following tables denote the past due status of the Corporation's gross loans held for investment, net of fair value adjustments, at the dates indicated.
|  | March 31, 2016
(In Thousands) | Current | 30-89 Days Past Due | Non-Accrual (1) | Total Loans Held for Investment
Mortgage loans: |  |  |  |
| Single-family | $ | 323,632 |  | $ | 1,508 |  | $ | 10,657 |  | $ | 335,797 |
| Multi-family | 376,467 |  | — |  | 2,404 |  | 378,871 |
| Commercial real estate | 93,384 |  | — |  | — |  | 93,384 |
| Construction | 9,679 |  | — |  | — |  | 9,679 |
| Other | 72 |  | — |  | — |  | 72 |
Commercial business loans | 354 |  | — |  | 98 |  | 452 |
Consumer loans | 230 |  | — |  | — |  | 230 |
| Total loans held for investment, gross | $ | 803,818 |  | $ | 1,508 |  | $ | 13,159 |  | $ | 818,485 |
(1) All loans 90 days or greater past due are placed on non-accrual status.
|  | June 30, 2015
(In Thousands) | Current | 30-89 Days Past Due | Non-Accrual (1) | Total Loans Held for Investment
Mortgage loans: |  |  |  |
| Single-family | $ | 354,082 |  | $ | 1,335 |  | $ | 10,544 |  | $ | 365,961 |
| Multi-family | 344,774 |  | — |  | 2,246 |  | 347,020 |
| Commercial real estate | 99,198 |  | — |  | 1,699 |  | 100,897 |
| Construction | 8,191 |  | — |  | — |  | 8,191 |
Commercial business loans | 557 |  | — |  | 109 |  | 666 |
Consumer loans | 244 |  | — |  | — |  | 244 |
| Total loans held for investment, gross | $ | 807,046 |  | $ | 1,335 |  | $ | 14,598 |  | $ | 822,979 |
(1) All loans 90 days or greater past due are placed on non-accrual status. The following tables summarize the Corporation’s allowance for loan losses and recorded investment in gross loans, by portfolio type, at the dates and for the periods indicated.
|  | Quarter Ended March 31, 2016
(In Thousands) | Single-family | Multi-family | Commercial Real Estate | Construction | Other Mortgage | Commercial Business | Consumer | Total
Allowance for loan losses: |  |  |  |  |  |  |  |
Allowance at beginning of period | $ | 5,720 |  | $ | 1,919 |  | $ | 778 |  | $ | 304 |  | $ | 1 |  | $ | 37 |  | $ | 9 |  | $ | 8,768 |
Recovery from the allowance for loan losses | (285 | ) | (74 | ) | (37 | ) | (294 | ) | — |  | (2 | ) | (2 | ) | (694 | )
Recoveries | 129 |  | 53 |  | — |  | — |  | — |  | — |  | 1 |  | 183 |
Charge-offs | (57 | ) | — |  | — |  | — |  | — |  | — |  | — |  | (57 | )
| Allowance for loan losses, end of period | $ | 5,507 |  | $ | 1,898 |  | $ | 741 |  | $ | 10 |  | $ | 1 |  | $ | 35 |  | $ | 8 |  | $ | 8,200 |
Allowance for loan losses: |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 20 |  | $ | — |  | $ | 20 |
Collectively evaluated for impairment | 5,507 |  | 1,898 |  | 741 |  | 10 |  | 1 |  | 15 |  | 8 |  | 8,180 |
| Allowance for loan losses, end of period | $ | 5,507 |  | $ | 1,898 |  | $ | 741 |  | $ | 10 |  | $ | 1 |  | $ | 35 |  | $ | 8 |  | $ | 8,200 |
Loans held for investment: |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 7,638 |  | $ | 1,933 |  | $ | — |  | $ | — |  | $ | — |  | $ | 98 |  | $ | — |  | $ | 9,669 |
Collectively evaluated for impairment | 328,159 |  | 376,938 |  | 93,384 |  | 9,679 |  | 72 |  | 354 |  | 230 |  | 808,816 |
| Total loans held for investment, gross | $ | 335,797 |  | $ | 378,871 |  | $ | 93,384 |  | $ | 9,679 |  | $ | 72 |  | $ | 452 |  | $ | 230 |  | $ | 818,485 |
Allowance for loan losses as a percentage of gross loans held for investment | 1.64 | % | 0.50 | % | 0.79 | % | 0.10 | % | 1.39 | % | 7.74 | % | 3.48 | % | 1.01 | %
|  | Quarter Ended March 31, 2015
(In Thousands) | Single-family | Multi-family | Commercial Real Estate | Construction | Commercial Business | Consumer | Total
Allowance for loan losses: |  |  |  |  |  |  |
Allowance at beginning of period | $ | 4,540 |  | $ | 2,998 |  | $ | 1,075 |  | $ | 17 |  | $ | 53 |  | $ | 10 |  | $ | 8,693 |
Provision (recovery) for loan losses | 102 |  | 26 |  | (238 | ) | 10 |  | (10 | ) | (1 | ) | (111 | )
Recoveries | 226 |  | 65 |  | — |  | — |  | — |  | — |  | 291 |
Charge-offs | (88 | ) | — |  | (73 | ) | — |  | — |  | — |  | (161 | )
| Allowance for loan losses, end of period | $ | 4,780 |  | $ | 3,089 |  | $ | 764 |  | $ | 27 |  | $ | 43 |  | $ | 9 |  | $ | 8,712 |
Allowance for loan losses: |  |  |  |  |  |  |
Individually evaluated for impairment | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 20 |  | $ | — |  | $ | 20 |
Collectively evaluated for impairment | 4,780 |  | 3,089 |  | 764 |  | 27 |  | 23 |  | 9 |  | 8,692 |
| Allowance for loan losses, end of period | $ | 4,780 |  | $ | 3,089 |  | $ | 764 |  | $ | 27 |  | $ | 43 |  | $ | 9 |  | $ | 8,712 |
Loans held for investment: |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 5,651 |  | $ | 1,982 |  | $ | 1,468 |  | $ | — |  | $ | 110 |  | $ | — |  | $ | 9,211 |
Collectively evaluated for impairment | 369,330 |  | 342,295 |  | 100,150 |  | 6,039 |  | 542 |  | 246 |  | 818,602 |
| Total loans held for investment, gross | $ | 374,981 |  | $ | 344,277 |  | $ | 101,618 |  | $ | 6,039 |  | $ | 652 |  | $ | 246 |  | $ | 827,813 |
Allowance for loan losses as a percentage of gross loans held for investment | 1.27 | % | 0.90 | % | 0.75 | % | 0.45 | % | 6.60 | % | 3.66 | % | 1.05 | %
|  | Nine Months Ended March 31, 2016
(In Thousands) | Single-family | Multi-family | Commercial Real Estate | Construction | Other Mortgage | Commercial Business | Consumer | Total
Allowance for loan losses: |  |  |  |  |  |  |  |
Allowance at beginning of period | $ | 5,280 |  | $ | 2,616 |  | $ | 734 |  | $ | 42 |  | $ | — |  | $ | 43 |  | $ | 9 |  | $ | 8,724 |
Provision (recovery) for loan losses | 124 |  | (885 | ) | (209 | ) | (32 | ) | 1 |  | (93 | ) | — |  | (1,094 | )
Recoveries | 356 |  | 167 |  | 216 |  | — |  | — |  | 85 |  | 1 |  | 825 |
Charge-offs | (253 | ) | — |  | — |  | — |  | — |  | — |  | (2 | ) | (255 | )
| Allowance for loan losses, end of period | $ | 5,507 |  | $ | 1,898 |  | $ | 741 |  | $ | 10 |  | $ | 1 |  | $ | 35 |  | $ | 8 |  | $ | 8,200 |
Allowance for loan losses: |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 20 |  | $ | — |  | $ | 20 |
Collectively evaluated for impairment | 5,507 |  | 1,898 |  | 741 |  | 10 |  | 1 |  | 15 |  | 8 |  | 8,180 |
| Allowance for loan losses, end of period | $ | 5,507 |  | $ | 1,898 |  | $ | 741 |  | $ | 10 |  | $ | 1 |  | $ | 35 |  | $ | 8 |  | $ | 8,200 |
Loans held for investment: |  |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 7,638 |  | $ | 1,933 |  | $ | — |  | $ | — |  | $ | — |  | $ | 98 |  | $ | — |  | $ | 9,669 |
Collectively evaluated for impairment | 328,159 |  | 376,938 |  | 93,384 |  | 9,679 |  | 72 |  | 354 |  | 230 |  | 808,816 |
| Total loans held for investment, gross | $ | 335,797 |  | $ | 378,871 |  | $ | 93,384 |  | $ | 9,679 |  | $ | 72 |  | $ | 452 |  | $ | 230 |  | $ | 818,485 |
Allowance for loan losses as a percentage of gross loans held for investment | 1.64 | % | 0.50 | % | 0.79 | % | 0.10 | % | 1.39 | % | 7.74 | % | 3.48 | % | 1.01 | %
|  | Nine Months Ended March 31, 2015
(In Thousands) | Single-family | Multi-family | Commercial Real Estate | Construction | Commercial Business | Consumer | Total
Allowance for loan losses: |  |  |  |  |  |  |
Allowance at beginning of period | $ | 5,476 |  | $ | 3,142 |  | $ | 989 |  | $ | 35 |  | $ | 92 |  | $ | 10 |  | $ | 9,744 |
Recovery from the allowance for loan losses | (790 | ) | (282 | ) | (152 | ) | (8 | ) | (49 | ) | (2 | ) | (1,283 | )
Recoveries | 499 |  | 229 |  | — |  | — |  | — |  | 1 |  | 729 |
Charge-offs | (405 | ) | — |  | (73 | ) | — |  | — |  | — |  | (478 | )
| Allowance for loan losses, end of period | $ | 4,780 |  | $ | 3,089 |  | $ | 764 |  | $ | 27 |  | $ | 43 |  | $ | 9 |  | $ | 8,712 |
Allowance for loan losses: |  |  |  |  |  |  |
Individually evaluated for impairment | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 20 |  | $ | — |  | $ | 20 |
Collectively evaluated for impairment | 4,780 |  | 3,089 |  | 764 |  | 27 |  | 23 |  | 9 |  | 8,692 |
| Allowance for loan losses, end of period | $ | 4,780 |  | $ | 3,089 |  | $ | 764 |  | $ | 27 |  | $ | 43 |  | $ | 9 |  | $ | 8,712 |
Loans held for investment: |  |  |  |  |  |  |
Individually evaluated for impairment | $ | 5,651 |  | $ | 1,982 |  | $ | 1,468 |  | $ | — |  | $ | 110 |  | $ | — |  | $ | 9,211 |
Collectively evaluated for impairment | 369,330 |  | 342,295 |  | 100,150 |  | 6,039 |  | 542 |  | 246 |  | 818,602 |
| Total loans held for investment, gross | $ | 374,981 |  | $ | 344,277 |  | $ | 101,618 |  | $ | 6,039 |  | $ | 652 |  | $ | 246 |  | $ | 827,813 |
Allowance for loan losses as a percentage of gross loans held for investment | 1.27 | % | 0.90 | % | 0.75 | % | 0.45 | % | 6.60 | % | 3.66 | % | 1.05 | %
The following tables identify the Corporation’s total recorded investment in non-performing loans by type at the dates and for the periods indicated. Generally, a loan is placed on non-accrual status when it becomes 90 days past due as to principal or interest or if the loan is deemed impaired, after considering economic and business conditions and collection efforts, where the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. In addition, interest income is not recognized on any loan where management has determined that collection is not reasonably assured. A non-performing loan may be restored to accrual status when delinquent principal and interest payments are brought current and future monthly principal and interest payments are expected to be collected on a timely basis. Loans with a related allowance reserve have been individually evaluated for impairment using either a discounted cash flow analysis or, for collateral dependent loans, current appraisals less costs to sell, to establish realizable value. This analysis may identify a specific impairment amount needed or may conclude that no reserve is needed. Loans that are not individually evaluated for impairment are included in pools of homogeneous loans for evaluation of related allowance reserves.
|  |  | At March 31, 2016
|  |  | Unpaid |  |  |  | Net
|  |  | Principal | Related | Recorded |  | Recorded
(In Thousands) | Balance | Charge-offs | Investment | Allowance(1) | Investment
Mortgage loans: |  |  |  |  |
| Single-family: |  |  |  |  |
|  | With a related allowance | $ | 3,058 |  | $ | — |  | $ | 3,058 |  | $ | (776 | ) | $ | 2,282 |
|  | Without a related allowance(2) | 9,218 |  | (1,580 | ) | 7,638 |  | — |  | 7,638 |
| Total single-family | 12,276 |  | (1,580 | ) | 10,696 |  | (776 | ) | 9,920 |
| Multi-family: |  |  |  |  |
|  | With a related allowance | 471 |  | — |  | 471 |  | (141 | ) | 330 |
|  | Without a related allowance(2) | 3,025 |  | (1,092 | ) | 1,933 |  | — |  | 1,933 |
| Total multi-family | 3,496 |  | (1,092 | ) | 2,404 |  | (141 | ) | 2,263 |
Commercial business loans: |  |  |  |  |
| With a related allowance | 98 |  | — |  | 98 |  | (20 | ) | 78 |
Total commercial business loans | 98 |  | — |  | 98 |  | (20 | ) | 78 |
Total non-performing loans | $ | 15,870 |  | $ | (2,672 | ) | $ | 13,198 |  | $ | (937 | ) | $ | 12,261 |
(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan, and fair value credit adjustments. (2) There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.
|  |  | At June 30, 2015
|  |  | Unpaid |  |  |  | Net
|  |  | Principal | Related | Recorded |  | Recorded
(In Thousands) | Balance | Charge-offs | Investment | Allowance(1) | Investment
Mortgage loans: |  |  |  |  |
| Single-family: |  |  |  |  |
|  | With a related allowance | $ | 3,881 |  | $ | — |  | $ | 3,881 |  | $ | (630 | ) | $ | 3,251 |
|  | Without a related allowance(2) | 8,462 |  | (1,801 | ) | 6,661 |  | — |  | 6,661 |
| Total single-family | 12,343 |  | (1,801 | ) | 10,542 |  | (630 | ) | 9,912 |
| Multi-family: |  |  |  |  |
|  | Without a related allowance(2) | 3,506 |  | (1,260 | ) | 2,246 |  | — |  | 2,246 |
| Total multi-family | 3,506 |  | (1,260 | ) | 2,246 |  | — |  | 2,246 |
| Commercial real estate: |  |  |  |  |
|  | Without a related allowance(2) | 1,699 |  | — |  | 1,699 |  | — |  | 1,699 |
| Total commercial real estate | 1,699 |  | — |  | 1,699 |  | — |  | 1,699 |
Commercial business loans: |  |  |  |  |
| With a related allowance | 109 |  | — |  | 109 |  | (20 | ) | 89 |
Total commercial business loans | 109 |  | — |  | 109 |  | (20 | ) | 89 |
Total non-performing loans | $ | 17,657 |  | $ | (3,061 | ) | $ | 14,596 |  | $ | (650 | ) | $ | 13,946 |
(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan. (2) There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance. At March 31, 2016 and June 30, 2015, there were no commitments to lend additional funds to those borrowers whose loans were classified as non-performing. For the quarters ended March 31, 2016 and 2015, the Corporation’s average investment in non-performing loans was $12.8 million and $11.3 million, respectively. The Corporation records payments on non-performing loans utilizing the cash basis or cost recovery method of accounting during the periods when the loans are on non-performing status. For both quarters ended March 31, 2016 and 2015, interest income of $50,000 was recognized, based on cash receipts from loan payments on non-performing loans and $125,000 was collected and applied to the net loan balances under the cost recovery method. Foregone interest income, which would have been recorded had the non-performing loans been current in accordance with their original terms, amounted to $19,000 and $87,000 for the quarters ended March 31, 2016 and 2015, respectively, and was not included in the results of operations. For the nine months ended March 31, 2016 and 2015, the Corporation’s average investment in non-performing loans was $14.0 million and $13.2 million, respectively. For the nine months ended March 31, 2016 and 2015, interest income of $187,000 and $255,000, respectively, was recognized, based on cash receipts from loan payments on non-performing loans; and $314,000 and $361,000, respectively, was collected and applied to the net loan balances under the cost recovery method. Foregone interest income, which would have been recorded had the non-performing loans been current in accordance with their original terms, amounted to $123,000 and $292,000 for the nine months ended March 31, 2016 and 2015, respectively, and was not included in the results of operations. The following table presents the average recorded investment in non-performing loans and the related interest income recognized for the quarters and nine months ended March 31, 2016 and 2015:
|  |  | Quarter Ended March 31,
|  |  | 2016 |  | 2015
|  |  | Average | Interest |  | Average | Interest
|  |  | Recorded | Income |  | Recorded | Income
|  |  | Investment | Recognized |  | Investment | Recognized
Without related allowances: |  |  |  |  |
| Mortgage loans: |  |  |  |  |
|  | Single-family | $ | 7,870 |  | $ | 19 |  |  | $ | 5,827 |  | $ | 19 |
|  | Multi-family | 1,941 |  | — |  |  | 1,988 |  | — |
|  | Commercial real estate | — |  | — |  |  | 1,487 |  | 21 |
|  |  | 9,811 |  | 19 |  |  | 9,302 |  | 40 |
With related allowances: |  |  |  |  |
| Mortgage loans: |  |  |  |  |
|  | Single-family | 2,529 |  | 22 |  |  | 1,619 |  | 8 |
|  | Multi-family | 314 |  | 7 |  |  | 259 |  | — |
| Commercial business loans | 98 |  | 2 |  |  | 116 |  | 2 |
|  | 2,941 |  | 31 |  |  | 1,994 |  | 10 |
| Total | $ | 12,752 |  | $ | 50 |  |  | $ | 11,296 |  | $ | 50 |
|  |  | Nine Months Ended March 31,
|  |  | 2016 |  | 2015
|  |  | Average | Interest |  | Average | Interest
|  |  | Recorded | Income |  | Recorded | Income
|  |  | Investment | Recognized |  | Investment | Recognized
Without related allowances: |  |  |  |  |
| Mortgage loans: |  |  |  |  |
|  | Single-family | $ | 8,544 |  | $ | 22 |  |  | $ | 6,813 |  | $ | 53 |
|  | Multi-family | 1,988 |  | 66 |  |  | 2,094 |  | — |
|  | Commercial real estate | 666 |  | 28 |  |  | 1,926 |  | 146 |
|  |  | 11,198 |  | 116 |  |  | 10,833 |  | 199 |
With related allowances: |  |  |  |  |
| Mortgage loans: |  |  |  |  |
|  | Single-family | 2,594 |  | 58 |  |  | 1,872 |  | 36 |
|  | Multi-family | 105 |  | 7 |  |  | 417 |  | 13 |
| Commercial business loans | 102 |  | 6 |  |  | 124 |  | 7 |
|  | 2,801 |  | 71 |  |  | 2,413 |  | 56 |
| Total | $ | 13,999 |  | $ | 187 |  |  | $ | 13,246 |  | $ | 255 |
For the quarters and nine months ended March 31, 2016 and 2015, there were no loans that were newly modified from their original terms, re-underwritten or identified in the Corporation’s asset quality reports as restructured loans. During the quarters and nine months ended March 31, 2016 and 2015, no restructured loans were in default within a 12-month period subsequent to their original restructuring. Additionally, during the quarters and nine months ended March 31, 2016 and 2015, there were no loans whose modification was extended beyond the initial maturity of the modification. At March 31, 2016 and June 30, 2015, there were no commitments to lend additional funds to those borrowers whose loans were restructured. As of March 31, 2016, the Corporation held 14 restructured loans with a net outstanding balance of $5.7 million: two were classified as special mention and remain on accrual status ($1.1 million); and 12 were classified as substandard ($4.6 million, all on non-accrual status). As of June 30, 2015, the Corporation held 18 restructured loans with a net outstanding balance of $6.6 million: two were classified as special mention on accrual status ($989,000); and 16 were classified as substandard ($5.6 million, all on non-accrual status). Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Assets that do not currently expose the Corporation to sufficient risk to warrant adverse classification but possess weaknesses are designated as special mention and are closely monitored by the Corporation. As of March 31, 2016 and June 30, 2015, $2.9 million or 50%, and $4.9 million or 74%, respectively, of the restructured loans were current with respect to their modified payment terms. The Corporation upgrades restructured single-family loans to the pass category if the borrower has demonstrated satisfactory contractual payments for at least six consecutive months; 12 months for those loans that were restructured more than once; and if the borrower has demonstrated satisfactory contractual payments beyond 12 consecutive months, the loan is no longer categorized as a restructured loan. In addition to the payment history described above, multi-family, commercial real estate, construction and commercial business loans (which are sometimes referred to in this report as “preferred loans”) must also demonstrate a combination of the following characteristics to be upgraded: satisfactory cash flow, satisfactory guarantor support, and additional collateral support, among others. To qualify for restructuring, a borrower must provide evidence of their creditworthiness such as, current financial statements, their most recent income tax returns, current paystubs, current W-2s, and most recent bank statements, among other documents, which are then verified by the Corporation. The Corporation re-underwrites the loan with the borrower’s updated financial information, new credit report, current loan balance, new interest rate, remaining loan term, updated property value and modified payment schedule, among other considerations, to determine if the borrower qualifies. The following table summarizes at the dates indicated the restructured loan balances, net of allowance for loan losses, by loan type and non-accrual versus accrual status:
(In Thousands) | March 31, 2016 | June 30, 2015
Restructured loans on non-accrual status: |  |
Mortgage loans: |  |
Single-family | $ | 3,002 |  | $ | 2,902 |
Multi-family | 1,542 |  | 1,593 |
Commercial real estate | — |  | 1,019 |
Commercial business loans | 78 |  | 89 |
Total | 4,622 |  | 5,603 |
Restructured loans on accrual status: |  |  |  |
Mortgage loans: |  |  |  |
Single-family | 1,114 |  | 989 |
Total | 1,114 |  | 989 |
Total restructured loans | $ | 5,736 |  | $ | 6,592 |
The following tables identify the Corporation’s total recorded investment in restructured loans by type at the dates and for the periods indicated.
|  |  | At March 31, 2016
|  |  | Unpaid |  |  |  | Net
|  |  | Principal | Related | Recorded |  | Recorded
(In Thousands) | Balance | Charge-offs | Investment | Allowance(1) | Investment
Mortgage loans: |  |  |  |  |
| Single-family: |  |  |  |  |
|  | With a related allowance | $ | 1,227 |  | $ | — |  | $ | 1,227 |  | $ | (245 | ) | $ | 982 |
|  | Without a related allowance(2) | 3,929 |  | (795 | ) | 3,134 |  | — |  | 3,134 |
| Total single-family | 5,156 |  | (795 | ) | 4,361 |  | (245 | ) | 4,116 |
| Multi-family: |  |  |  |  |
|  | Without a related allowance(2) | 2,597 |  | (1,055 | ) | 1,542 |  | — |  | 1,542 |
| Total multi-family | 2,597 |  | (1,055 | ) | 1,542 |  | — |  | 1,542 |
Commercial business loans: |  |  |  |  |
| With a related allowance | 98 |  | — |  | 98 |  | (20 | ) | 78 |
Total commercial business loans | 98 |  | — |  | 98 |  | (20 | ) | 78 |
Total restructured loans | $ | 7,851 |  | $ | (1,850 | ) | $ | 6,001 |  | $ | (265 | ) | $ | 5,736 |
(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan. (2) There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance.
|  |  | At June 30, 2015
|  |  | Unpaid |  |  |  | Net
|  |  | Principal | Related | Recorded |  | Recorded
(In Thousands) | Balance | Charge-offs | Investment | Allowance(1) | Investment
Mortgage loans: |  |  |  |  |
| Single-family |  |  |  |  |
|  | With a related allowance | $ | 576 |  | $ | — |  | $ | 576 |  | $ | (115 | ) | $ | 461 |
|  | Without a related allowance(2) | 4,397 |  | (967 | ) | 3,430 |  | — |  | 3,430 |
| Total single-family | 4,973 |  | (967 | ) | 4,006 |  | (115 | ) | 3,891 |
| Multi-family: |  |  |  |  |
|  | Without a related allowance(2) | 2,795 |  | (1,202 | ) | 1,593 |  | — |  | 1,593 |
| Total multi-family | 2,795 |  | (1,202 | ) | 1,593 |  | — |  | 1,593 |
| Commercial real estate: |  |  |  |  |
|  | Without a related allowance(2) | 1,019 |  | — |  | 1,019 |  | — |  | 1,019 |
| Total commercial real estate | 1,019 |  | — |  | 1,019 |  | — |  | 1,019 |
Commercial business loans: |  |  |  |  |
| With a related allowance | 109 |  | — |  | 109 |  | (20 | ) | 89 |
Total commercial business loans | 109 |  | — |  | 109 |  | (20 | ) | 89 |
Total restructured loans | $ | 8,896 |  | $ | (2,169 | ) | $ | 6,727 |  | $ | (135 | ) | $ | 6,592 |
(1) Consists of collectively and individually evaluated allowances, specifically assigned to the individual loan. (2) There was no related allowance for loan losses because the loans have been charged-off to their fair value or the fair value of the collateral is higher than the loan balance. During the quarter ended March 31, 2016, two properties were acquired in the settlement of loans, while three previously foreclosed upon properties were sold. This compares to the quarter ended March 31, 2015 when one property was acquired in the settlement of loans, while two previously foreclosed upon properties were sold. For the nine months ended March 31, 2016, eight properties were acquired in the settlement of loans, while six previously foreclosed upon properties were sold. This compares to the nine months ended March 31, 2015 when eight properties were acquired in the settlement of loans, while six previously foreclosed upon properties were sold and one real estate owned property was written off. As of March 31, 2016, the net fair value of real estate owned was $3.2 million, comprised of four properties located in Southern California and one property located in Arizona. This compares to the real estate owned net fair value of $2.4 million at June 30, 2015, comprised of two properties located in California and one property located in Nevada. A new appraisal was obtained on each of the properties at the time of foreclosure and fair value was derived by using the lower of the appraised value or the listing price of the property, net of selling costs. Any initial loss was recorded as a charge to the allowance for loan losses before being transferred to real estate owned. Subsequent to transfer to real estate owned, if there is further deterioration in real estate values, specific real estate owned loss reserves are established and charged to the statement of operations. In addition, the Corporation records costs to carry real estate owned as real estate operating expenses as incurred.

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