Loans Receivable And Allowance For Credit Losses

9 Months Ended

Jun. 30, 2018

Loans and Leases Receivable Disclosure [Abstract]

Loans Receivable And Allowance For Credit Losses

LOANS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable, net at the dates presented is summarized as follows:

	June 30, 2018			September 30, 2017
	(Dollars in thousands)
Real estate loans:
One- to four-family:
Originated	$	3,931,251		$	3,959,232
Correspondent purchased	2,514,929			2,445,311
Bulk purchased	309,837			351,705
Construction	27,565			30,647
Total	6,783,582			6,786,895
Commercial:
Permanent	274,410			183,030
Construction	44,645			86,952
Total	319,055			269,982
Total real estate loans	7,102,637			7,056,877
Consumer loans:
Home equity	119,079			122,066
Other	4,453			3,808
Total consumer loans	123,532			125,874
Total loans receivable	7,226,169			7,182,751
Less:
ACL	8,344			8,398
Discounts/unearned loan fees	25,124			24,962
Premiums/deferred costs	(46,683		)	(45,680		)
	$	7,239,384		$	7,195,071

Lending Practices and Underwriting Standards - Originating and purchasing one- to four-family loans is the Bank's primary lending business. The Bank also originates consumer loans primarily secured by one- to four-family residential properties and originates and participates in commercial real estate loans. The Bank has a loan concentration in one- to four-family loans and a geographic concentration of these loans in Kansas and Missouri.

One- to four-family loans - Full documentation to support an applicant's credit and income, and sufficient funds to cover all applicable fees and reserves at closing, are required on all loans. Generally, loans are currently underwritten according to the "ability to repay" and "qualified mortgage" standards, as issued by the Consumer Financial Protection Bureau ("CFPB"). Properties securing one- to four-family loans are appraised by either staff appraisers or fee appraisers, both of which are independent of the loan origination function and approved by our Board of Directors.

The underwriting standards for loans purchased from correspondent lenders are generally similar to the Bank's internal underwriting standards. The underwriting of loans purchased from correspondent lenders on a loan-by-loan basis is performed by the Bank's underwriters.

The Bank also originates construction-to-permanent loans secured by one- to four-family residential real estate. Construction loans are obtained by homeowners who will occupy the property when construction is complete. The Bank does not originate construction loans to builders for speculative purposes. Construction draw requests and the supporting documentation are reviewed and approved by designated personnel. The Bank also performs regular documented inspections of the construction project to ensure the funds are being used for the intended purpose and the project is being completed according to the plans and specifications provided.

Commercial real estate loans - The Bank's commercial real estate loans are originated by the Bank or are in participation with a lead bank. When underwriting a commercial real estate loan, several factors are considered, such as the income producing potential of the property, cash equity provided by the borrower, the financial strength of the borrower, managerial expertise of the borrower or tenant, feasibility studies, lending experience with the borrower and the marketability of the property. For commercial real estate participation loans, the Bank performs the same underwriting procedures as if the loan was being originated by the Bank.

At the time of origination, loan-to-value ("LTV") ratios on commercial real estate loans generally do not exceed 80% of the appraised value of the property securing the loans and the minimum debt service coverage ratio is generally 1.25. Appraisals on properties securing these loans are performed by independent state certified fee appraisers.

Consumer loans - The Bank offers a variety of secured consumer loans, including home equity loans and lines of credit, home improvement loans, auto loans, and loans secured by savings deposits. The Bank also originates a very limited amount of unsecured loans. The Bank does not originate any consumer loans on an indirect basis, such as contracts purchased from retailers of goods or services which have extended credit to their customers. The majority of the consumer loan portfolio is comprised of home equity lines of credit for which the Bank also has the first mortgage or the home equity line of credit is in the first lien position.

The underwriting standards for consumer loans include a determination of an applicant's payment history on other debts and an assessment of an applicant's ability to meet existing obligations and payments on the proposed loan. Although creditworthiness of an applicant is a primary consideration, the underwriting process also includes a comparison of the value of the security in relation to the proposed loan amount.

Credit Quality Indicators - Based on the Bank's lending emphasis and underwriting standards, management has segmented the loan portfolio into three segments: (1) one- to four-family; (2) consumer; and (3) commercial real estate. The one- to four-family and consumer loan portfolios are further segmented into classes for purposes of providing disaggregated information about the credit quality of the loan portfolio. The classes are: one- to four-family - originated, one- to four-family - correspondent purchased, one- to four-family - bulk purchased, consumer - home equity, and consumer - other.

The Bank's primary credit quality indicators for the one- to four-family and consumer - home equity loan portfolios are delinquency status, asset classifications, LTV ratios, and borrower credit scores. The Bank's primary credit quality indicators for the commercial real estate and consumer - other loan portfolios are delinquency status and asset classifications.

The following tables present the recorded investment, by class, in loans 30 to 89 days delinquent, loans 90 or more days delinquent or in foreclosure, total delinquent loans, current loans, and total recorded investment at the dates presented. The recorded investment in loans is defined as the unpaid principal balance of a loan, less charge-offs and inclusive of unearned loan fees and deferred costs. At June 30, 2018 and September 30, 2017, all loans 90 or more days delinquent were on nonaccrual status.

	June 30, 2018
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family - originated	$	7,614	$	5,028	$	12,642	$	3,932,144	$	3,944,786
One- to four-family - correspondent	1,776		880		2,656		2,547,714		2,550,370
One- to four-family - bulk purchased	3,802		2,612		6,414		304,863		311,277
Commercial real estate	41		—		41		317,722		317,763
Consumer - home equity	341		423		764		118,315		119,079
Consumer - other	22		2		24		4,429		4,453
	$	13,596	$	8,945	$	22,541	$	7,225,187	$	7,247,728

	September 30, 2017
			90 or More Days		Total				Total
	30 to 89 Days		Delinquent or		Delinquent		Current		Recorded
	Delinquent		in Foreclosure		Loans		Loans		Investment
	(Dollars in thousands)
One- to four-family - originated	$	13,216	$	5,500	$	18,716	$	3,956,598	$	3,975,314
One- to four-family - correspondent	1,855		92		1,947		2,477,916		2,479,863
One- to four-family - bulk purchased	3,233		3,399		6,632		346,807		353,439
Commercial real estate	—		—		—		268,979		268,979
Consumer - home equity	467		406		873		121,193		122,066
Consumer - other	33		4		37		3,771		3,808
	$	18,804	$	9,401	$	28,205	$	7,175,264	$	7,203,469

The recorded investment in mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process as of June 30, 2018 and September 30, 2017 was $2.8 million and $4.3 million, respectively, which is included in loans 90 or more days delinquent or in foreclosure in the table above.   The carrying value of residential OREO held as a result of obtaining physical possession upon completion of a foreclosure or through completion of a deed in lieu of foreclosure was $897 thousand at June 30, 2018 and $1.4 million at September 30, 2017.

The following table presents the recorded investment, by class, in loans classified as nonaccrual at the dates presented.

	June 30, 2018		September 30, 2017
	(Dollars in thousands)
One- to four-family - originated	$	7,490	$	10,054
One- to four-family - correspondent	977		1,804
One- to four-family - bulk purchased	2,964		4,264
Commercial real estate	—		—
Consumer - home equity	492		519
Consumer - other	2		4
	$	11,925	$	16,645

In accordance with the Bank's asset classification policy, management regularly reviews the problem loans in the Bank's portfolio to determine whether any loans require classification. Loan classifications are defined as follows:

• Special mention - These loans are performing loans on which known information about the collateral pledged or the possible credit problems of the borrower(s) have caused management to have doubts as to the ability of the borrower(s) to comply with present loan repayment terms and which may result in the future inclusion of such loans in the non-performing loan categories.

• Substandard - A loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans include those characterized by the distinct possibility the Bank 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 present make collection or liquidation in full on the basis of currently existing facts and conditions and values highly questionable and improbable.

• Loss - Loans classified as loss are considered uncollectible and of such little value that their continuance as assets on the books is not warranted.

The following table sets forth the recorded investment in loans classified as special mention or substandard, by class, at the dates presented. Special mention and substandard loans are included in the ACL formula analysis model if the loans are not individually evaluated for loss. Loans classified as doubtful or loss are individually evaluated for loss. At the dates presented, there were no loans classified as doubtful, and all loans classified as loss were fully charged-off.

	June 30, 2018				September 30, 2017
	Special Mention		Substandard		Special Mention		Substandard
	(Dollars in thousands)
One- to four-family - originated	$	8,867	$	22,892	$	7,031	$	30,059
One- to four-family - correspondent	885		3,497		261		3,800
One- to four-family - bulk purchased	—		6,765		—		8,005
Commercial real estate	41		—		—		—
Consumer - home equity	286		889		9		1,032
Consumer - other	—		3		—		4
	$	10,079	$	34,046	$	7,301	$	42,900

The following table shows the weighted average credit score and weighted average LTV for one- to four-family loans and consumer home equity loans at the dates presented. Borrower credit scores are intended to provide an indication as to the likelihood that a borrower will repay their debts. Credit scores are updated at least semiannually, with the last update in March 2018, from a nationally recognized consumer rating agency. The LTV ratios provide an estimate of the extent to which the Bank may incur a loss on any given loan that may go into foreclosure. The consumer - home equity LTV does not take into account the first lien position, if applicable.  The LTV ratios were based on the current loan balance and either the lesser of the purchase price or original appraisal, or the most recent Bank appraisal, if available. In most cases, the most recent appraisal was obtained at the time of origination.

	June 30, 2018			September 30, 2017
	Credit Score	LTV		Credit Score	LTV
One- to four-family - originated	768	63	%	767	63	%
One- to four-family - correspondent	764	67		764	68
One- to four-family - bulk purchased	759	62		757	63
Consumer - home equity	755	19		755	19
	766	63		765	64

Troubled Debt Restructurings ("TDRs") - The following tables present the recorded investment prior to restructuring and immediately after restructuring in all loans restructured during the periods presented. These tables do not reflect the recorded investment at the end of the periods indicated. Any increase in the recorded investment at the time of the restructuring was generally due to the capitalization of delinquent interest and/or escrow balances. During the fourth quarter of fiscal year 2017, management refined its methodology for assessing whether a loan modification qualifies as a TDR which, though not material, resulted in fewer loans being classified as TDRs in the current fiscal year.

	For the Three Months Ended					For the Nine Months Ended
	June 30, 2018					June 30, 2018
	Number	Pre-		Post-		Number	Pre-		Post-
	of	Restructured		Restructured		of	Restructured		Restructured
	Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family - originated	1	$	40	$	47	4	$	207	$	223
One- to four-family - correspondent	1	97		97		1	97		97
One- to four-family - bulk purchased	—	—		—		—	—		—
Commercial real estate	—	—		—		—	—		—
Consumer - home equity	—	—		—		—	—		—
Consumer - other	—	—		—		—	—		—
	2	$	137	$	144	5	$	304	$	320

	For the Three Months Ended					For the Nine Months Ended
	June 30, 2017					June 30, 2017
	Number	Pre-		Post-		Number	Pre-		Post-
	of	Restructured		Restructured		of	Restructured		Restructured
	Contracts	Outstanding		Outstanding		Contracts	Outstanding		Outstanding
	(Dollars in thousands)
One- to four-family - originated	28	$	2,447	$	2,518	109	$	11,735	$	12,195
One- to four-family - correspondent	7	1,435		1,443		10	1,695		1,704
One- to four-family - bulk purchased	1	344		348		3	1,031		1,048
Commercial real estate	—	—		—		—	—		—
Consumer - home equity	3	51		53		17	368		380
Consumer - other	—	—		—		—	—		—
	39	$	4,277	$	4,362	139	$	14,829	$	15,327

The following table provides information on TDRs that became delinquent during the periods presented within 12 months after being restructured.

	For the Three Months Ended						For the Nine Months Ended
	June 30, 2018			June 30, 2017			June 30, 2018			June 30, 2017
	Number of	Recorded		Number of	Recorded		Number of	Recorded		Number of	Recorded
	Contracts	Investment		Contracts	Investment		Contracts	Investment		Contracts	Investment
	(Dollars in thousands)
One- to four-family - originated	1	$	34	14	$	1,439	20	$	1,288	36	$	3,486
One- to four-family - correspondent	—	—		1	119		1	124		1	119
One- to four-family - bulk purchased	—	—		1	354		3	1,040		1	354
Commercial real estate	—	—		—	—		—	—		—	—
Consumer - home equity	—	—		6	93		4	133		15	432
Consumer - other	—	—		—	—		—	—		—	—
	1	$	34	22	$	2,005	28	$	2,585	53	$	4,391

Impaired loans - The following information pertains to impaired loans, by class, as of the dates presented. All impaired loans were individually evaluated for loss and all losses were charged-off, resulting in no related ACL for these loans.

	June 30, 2018				September 30, 2017
			Unpaid				Unpaid
	Recorded		Principal		Recorded		Principal
	Investment		Balance		Investment		Balance
	(Dollars in thousands)
One- to four-family - originated	$	20,662	$	21,329	$	30,251	$	30,953
One- to four-family - correspondent	2,926		3,023		3,800		3,771
One- to four-family - bulk purchased	6,041		7,005		7,403		8,606
Commercial real estate	—		—		—		—
Consumer - home equity	535		767		775		997
Consumer - other	—		29		—		24
	$	30,164	$	32,153	$	42,229	$	44,351

The following information pertains to impaired loans, by class, for the periods presented. During the fourth quarter of fiscal year 2017, management refined its methodology for classifying loans as impaired. The change resulting from this refinement was immaterial. Impaired loans include loans partially charged-off and TDRs.

	For the Three Months Ended								For the Nine Months Ended
	June 30, 2018				June 30, 2017				June 30, 2018				June 30, 2017
	Average		Interest		Average		Interest		Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income		Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized		Investment		Recognized		Investment		Recognized
	(Dollars in thousands)
With no related allowance recorded
One- to four-family - originated	$	21,939	$	236	$	24,342	$	230	$	25,254	$	784	$	23,478	$	653
One- to four-family - correspondent	3,055		24		3,497		32		3,351		88		3,463		91
One- to four-family - bulk purchased	6,113		48		9,950		49		6,563		143		10,490		144
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	552		10		1,095		12		609		29		1,043		75
Consumer - other	—		—		4		—		—		—		8		—
	31,659		318		38,888		323		35,777		1,044		38,482		963
With an allowance recorded
One- to four-family - originated	—		—		12,787		117		—		—		12,878		367
One- to four-family - correspondent	—		—		2,405		20		—		—		2,150		52
One- to four-family - bulk purchased	—		—		1,136		7		—		—		1,358		17
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	—		—		444		4		—		—		525		33
Consumer - other	—		—		12		—		—		—		12		—
	—		—		16,784		148		—		—		16,923		469
Total
One- to four-family - originated	21,939		236		37,129		347		25,254		784		36,356		1,020
One- to four-family - correspondent	3,055		24		5,902		52		3,351		88		5,613		143
One- to four-family - bulk purchased	6,113		48		11,086		56		6,563		143		11,848		161
Commercial real estate	—		—		—		—		—		—		—		—
Consumer - home equity	552		10		1,539		16		609		29		1,568		108
Consumer - other	—		—		16		—		—		—		20		—
	$	31,659	$	318	$	55,672	$	471	$	35,777	$	1,044	$	55,405	$	1,432

Allowance for Credit Losses - The following is a summary of ACL activity, by loan portfolio segment, for the periods presented, and the ending balance of ACL based on the Company's impairment methodology.

	For the Three Months Ended June 30, 2018
	One- to Four-Family
				Correspondent			Bulk					Commercial
	Originated			Purchased			Purchased		Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,156		$	2,034		$	1,000	$	6,190		$	2,038	$	162		$	8,390
Charge-offs	(51		)	—			—		(51		)	—		(3		)	(54		)
Recoveries	4			—			—		4			—		4			8
Provision for credit losses	(80		)	(111		)	—		(191		)	192		(1		)	—
Ending balance	$	3,029		$	1,923		$	1,000	$	5,952		$	2,230	$	162		$	8,344

	For the Nine Months Ended June 30, 2018
	One- to Four-Family
				Correspondent			Bulk						Commercial
	Originated			Purchased			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,173		$	1,922		$	1,000		$	6,095		$	2,112	$	191		$	8,398
Charge-offs	(122		)	(128		)	—			(250		)	—		(38		)	(288		)
Recoveries	21			—			196			217			—		17			234
Provision for credit losses	(43		)	129			(196		)	(110		)	118		(8		)	—
Ending balance	$	3,029		$	1,923		$	1,000		$	5,952		$	2,230	$	162		$	8,344

	For the Three Months Ended June 30, 2017
	One- to Four-Family
				Correspondent			Bulk						Commercial
	Originated			Purchased			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,351		$	1,940		$	1,000		$	6,291		$	1,885	$	271		$	8,447
Charge-offs	(4		)	—			(25		)	(29		)	—		(12		)	(41		)
Recoveries	3			—			69			72			—		8			80
Provision for credit losses	(128		)	(24		)	(44		)	(196		)	204		(8		)	—
Ending balance	$	3,222		$	1,916		$	1,000		$	6,138		$	2,089	$	259		$	8,486

	For the Nine Months Ended June 30, 2017
	One- to Four-Family
				Correspondent			Bulk						Commercial
	Originated			Purchased			Purchased			Total			Real Estate		Consumer			Total
	(Dollars in thousands)
Beginning balance	$	3,928		$	2,102		$	1,065		$	7,095		$	1,208	$	237		$	8,540
Charge-offs	(45		)	—			(73		)	(118		)	—		(37		)	(155		)
Recoveries	3			—			69			72			—		29			101
Provision for credit losses	(664		)	(186		)	(61		)	(911		)	881		30			—
Ending balance	$	3,222		$	1,916		$	1,000		$	6,138		$	2,089	$	259		$	8,486

The following is a summary of the loan portfolio and related ACL balances, at the dates presented, by loan portfolio segment disaggregated by the Company's impairment method. There was no ACL for loans individually evaluated for impairment at either date as all losses were charged-off.

	June 30, 2018
	One- to Four-Family
			Correspondent		Bulk				Commercial
	Originated		Purchased		Purchased		Total		Real Estate		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	3,924,124	$	2,547,444	$	305,236	$	6,776,804	$	317,763	$	122,997	$	7,217,564
Recorded investment in loans
individually evaluated for impairment	20,662		2,926		6,041		29,629		—		535		30,164
	$	3,944,786	$	2,550,370	$	311,277	$	6,806,433	$	317,763	$	123,532	$	7,247,728
ACL for loans collectively
evaluated for impairment	$	3,029	$	1,923	$	1,000	$	5,952	$	2,230	$	162	$	8,344

	September 30, 2017
	One- to Four-Family
			Correspondent		Bulk				Commercial
	Originated		Purchased		Purchased		Total		Real Estate		Consumer		Total
	(Dollars in thousands)
Recorded investment in loans
collectively evaluated for impairment	$	3,945,063	$	2,476,063	$	346,035	$	6,767,161	$	268,979	$	125,100	$	7,161,240
Recorded investment in loans
individually evaluated for impairment	30,251		3,800		7,404		41,455		—		774		42,229
	$	3,975,314	$	2,479,863	$	353,439	$	6,808,616	$	268,979	$	125,874	$	7,203,469
ACL for loans collectively
evaluated for impairment	$	3,173	$	1,922	$	1,000	$	6,095	$	2,112	$	191	$	8,398