LOANS

Portfolio loans consist of the following:

	September 30,			December 31,
	2018			2017
	(Dollars in thousands)
Commercial loans
Multifamily	$	139,938		$	120,480
Nonresidential		408,938			381,611
Land		16,129			15,162
Construction		132,961			116,863
Secured		226,657			177,994
Unsecured		7,144			10,506
Total commercial loans		931,767			822,616
Residential mortgage loans
One-to four-family		909,626			870,939
Construction		39,396			49,092
Total residential mortgage loans		949,022			920,031
Consumer loans
Home equity		187,878			195,852
Auto		82,219			64,364
Marine		1,276			1,526
Recreational vehicle		4,546			5,696
Other		7,189			6,056
Total consumer loans		283,108			273,494
Total loans		2,163,897			2,016,141
Less:
Allowance for loan losses		21,332			21,202
Deferred loan costs, net		(6,377	)		(4,938	)
Total		14,955			16,264
Loans, net	$	2,148,942		$	1,999,877

The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and are based on impairment method as of September 30, 2018 and December 31, 2017 and activity for the three and nine months ended September 30, 2018 and 2017.

Allowance For Loan Losses

	Commercial Loans			Residential Loans			Consumer Loans			Total
	(Dollars in thousands)
For the three months ended September 30, 2018
Beginning balance	$	12,808		$	5,867		$	2,730		$	21,405
Provision (recovery)		(128	)		255			124			251
Charge-offs		(303	)		(203	)		(141	)		(647	)
Recoveries		205			62			56			323
Ending balance	$	12,582		$	5,981		$	2,769		$	21,332
For the nine months ended September 30, 2018
Beginning balance	$	12,542		$	5,860		$	2,800		$	21,202
Provision		5			342			173			520
Charge-offs		(378	)		(384	)		(410	)		(1,172	)
Recoveries		413			163			206			782
Ending balance	$	12,582		$	5,981		$	2,769		$	21,332
As of September 30, 2018
Period-end amount allocated to:
Loans individually evaluated for impairment	$	514		$	817		$	306			1,637
Loans collectively evaluated for impairment		12,068			5,164			2,463			19,695
Loans acquired with deteriorated credit quality		—			—			—			—
Ending balance	$	12,582		$	5,981		$	2,769		$	21,332
Period-end balances:
Loans individually evaluated for impairment		3,108			13,764			5,925			22,797
Loans collectively evaluated for impairment		927,576			935,258			277,183			2,140,017
Loans acquired with deteriorated credit quality		1,083			—			—			1,083
Ending balance	$	931,767		$	949,022		$	283,108		$	2,163,897

Allowance For Loan Losses

	Commercial Loans			Residential Loans			Consumer Loans			Total
For the three months ended September 30, 2017
Beginning balance	$	10,821		$	5,968		$	2,871		$	19,660
Provision		512			369			(160	)		721
Charge-offs		(12	)		(427	)		(147	)		(586	)
Recoveries		361			136			263			760
Ending balance	$	11,682		$	6,046		$	2,827		$	20,555
For the nine months ended September 30, 2017
Beginning balance	$	10,824		$	5,538		$	2,725		$	19,087
Provision		1,537			1,234			267			3,038
Charge-offs		(1,335	)		(930	)		(626	)		(2,891	)
Recoveries		656			204			461			1,321
Ending balance	$	11,682		$	6,046		$	2,827		$	20,555
As of December 31, 2017
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 acquired 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 acquired with deteriorated credit quality		1,194			—			—			1,194
Ending balance	$	822,616		$	920,031		$	273,494		$	2,016,141

The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required based on an analysis using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations, estimated collateral values, general economic conditions in the market area and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off.

Other loans not reviewed specifically by management are evaluated as a homogenous group of loans (generally single-family residential mortgage loans and all consumer credits except marine loans) using a loss factor applied to the outstanding loan balance to determine the level of reserve required. This loss factor consists of two components, a quantitative and a qualitative component. The quantitative component is based on a historical analysis of all charged-off loans, net of recoveries. In determining the qualitative factors, consideration is given to such attributes as lending policies, economic conditions, nature and volume of the portfolio, management, loan quality trend, loan review, collateral value, concentrations, economic cycles and other external factors. As of September 30, 2018, the Company evaluated 25 quarters of net charge-off history and applied this information to the current period. This component is combined with the qualitative component to arrive at the loss factor, which is applied to the outstanding balance of homogenous loans.

The following table presents loans individually evaluated for impairment by class of loans as of and for nine months ended September 30, 2018:

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	$	25	$	—	$	—	$	—	$	—	$	—
Nonresidential		624		134		—		108		5		5
Land		—		—		—		5		—		—
Construction		2,447		—		—		—		—		—
Secured		1,169		921		—		906		1		1
Unsecured		474		—		—		—		8		8
Total commercial loans		4,739		1,055		—		1,019		14		14
Residential mortgage loans
One-to four-family		6,578		5,424		—		5,558		117		92
Construction		—		—		—		—		—		—
Total residential mortgage loans		6,578		5,424		—		5,558		117		92
Consumer loans
Home equity		1,262		1,044		—		1,076		17		15
Auto		26		19		—		29		1		1
Marine		553		181		—		181		—		—
Recreational vehicle		652		218		—		146		15		9
Other		21		21		—		10		1		1
Total consumer loans		2,514		1,483		—		1,442		34		26
Total	$	13,831	$	7,962	$	—	$	8,019	$	165	$	132
With a specific allowance recorded
Commercial loans
Multifamily	$	422	$	275	$	28	$	275	$	—	$	—
Nonresidential		1,216		1,210		13		1,320		65		65
Land		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Secured		819		568		473		576		—		—
Unsecured		—		—		—		—		—		—
Total commercial loans		2,457		2,053		514		2,171		65		65
Residential mortgage loans
One-to four-family		8,455		8,340		817		9,430		378		291
Construction		—		—		—		—		—		—
Total residential mortgage loans		8,455		8,340		817		9,430		378		291
Consumer loans
Home equity		4,156		4,074		289		4,398		215		165
Auto		—		—		—		—		—		—
Marine		93		93		1		96		5		4
Recreational vehicle		287		275		16		364		17		13
Other		—		—		—		—		—		—
Total consumer loans		4,536		4,442		306		4,858		237		182
Total		15,448		14,835		1,637		16,459		680		538
Total impaired loans	$	29,279	$	22,797	$	1,637	$	24,478	$	845	$	670

The following table presents loans individually evaluated for impairment by class of loans as of and for nine months ended September 30, 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	$	466	$	402	$	—	$	309	$	3	$	3
Nonresidential		673		153		—		818		6		6
Land		715		9		—		15		—		—
Construction		2,467		—		—		—		—		—
Secured		263		210		—		195		1		1
Unsecured		194		—		—		—		—		—
Total commercial loans		4,778		774		—		1,337		10		10
Residential mortgage loans
One-to four-family		6,793		5,814		—		6,025		81		73
Construction		—		—		—		—		—		—
Total residential mortgage loans		6,793		5,814		—		6,025		81		73
Consumer loans
Home equity		1,556		1,177		—		1,477		11		11
Auto		8		1		—		9		—		—
Marine		540		169		—		200		—		—
Recreational vehicle		809		389		—		220		12		12
Other		1		1		—		—		—		—
Total consumer loans		2,914		1,737		—		1,906		23		23
Total	$	14,485	$	8,325	$	—	$	9,268	$	114	$	106
With a specific allowance recorded
Commercial loans
Multifamily	$	—	$	—	$	—	$	—	$	—	$	—
Nonresidential		1,582		1,548		16		2,010		86		85
Land		—		—		—		—		—		—
Construction		—		—		—		—		—		—
Secured		—		—		—		43		—		—
Unsecured		—		—		—		—		—		—
Total commercial loans		1,582		1,548		16		2,053		86		85
Residential mortgage loans
One-to four-family		11,042		10,904		1,169		10,799		385		343
Construction		—		—		—		—		—		—
Total residential mortgage loans		11,042		10,904		1,169		10,799		385		343
Consumer loans
Home equity		5,132		5,055		387		5,173		214		199
Auto		—		—		—		—		—		—
Marine		102		102		1		105		4		4
Recreational vehicle		432		420		23		616		14		14
Other		—		—		—		—		—		—
Total consumer loans		5,666		5,577		411		5,894		232		217
Total		18,290		18,029		1,596		18,746		703		645
Total impaired loans	$	32,775	$	26,354	$	1,596	$	28,014	$	817	$	751

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2017:

Impaired Loans

(Dollars in thousands)

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no specific allowance recorded
Commercial loans
Multifamily	$	41	$	—	$	—
Nonresidential		651		144		—
Land		716		9		—
Construction		2,467		—		—
Secured		1,042		894		—
Unsecured		187		—		—
Total commercial loans		5,104		1,047		—
Residential mortgage loans
One-to four-family		6,432		5,441		—
Construction		—		—		—
Total residential mortgage loans		6,432		5,441		—
Consumer loans
Home equity		1,399		1,059		—
Auto		29		14		—
Marine		553		181		—
Recreational vehicle		578		151		—
Other		3		3		—
Total consumer loans		2,562		1,408		—
Total	$	14,098	$	7,896	$	—
With a specific allowance recorded
Commercial loans
Multifamily	$	422	$	275	$	28
Nonresidential		1,455		1,423		16
Land		—		—		—
Construction		—		—		—
Secured		893		611		472
Unsecured		—		—		—
Total commercial loans		2,770		2,309		516
Residential mortgage loans
One-to four-family		10,874		10,699		1,145
Construction		—		—		—
Total residential mortgage loans		10,874		10,699		1,145
Consumer loans
Home equity		4,921		4,840		377
Auto		—		—		—
Marine		100		100		1
Recreational vehicle		418		406		20
Other		—		—		—
Total consumer loans		5,439		5,346		398
Total		19,083		18,354		2,059
Total impaired loans	$	33,181	$	26,250	$	2,059

The following table presents the average balance, interest income recognized and cash basis income recognized for loans individually evaluated for impairment by class of loans for the three months ended September 30, 2018:

	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
With no specific allowance recorded
Commercial loans
Multifamily	$	—	$	—	$	—
Nonresidential		136		1		1
Land		—		—		—
Construction		—		—		—
Secured		914		—		—
Unsecured		—		8		8
Total commercial loans		1,050		9		9
Residential mortgage loans
One-to four-family		5,709		41		32
Construction		—		—		—
Total residential mortgage loans		5,709		41		32
Consumer loans
Home equity		1,134		6		4
Auto		21		1		1
Marine		181		—		—
Recreational vehicle		159		9		4
Other		11		1		1
Total consumer loans		1,506		17		10
Total	$	8,265	$	67	$	51
With a specific allowance recorded
Commercial loans
Multifamily	$	275	$	—	$	—
Nonresidential		1,221		13		13
Land		—		—		—
Construction		—		—		—
Secured		568		—		—
Unsecured		—		—		—
Total commercial loans		2,064		13		13
Residential mortgage loans
One-to four-family		8,401		147		98
Construction		—		—		—
Total residential mortgage loans		8,401		147		98
Consumer loans
Home equity		4,138		92		56
Auto		—		—		—
Marine		94		2		1
Recreational vehicle		328		8		4
Other		—		—		—
Total consumer loans		4,560		102		61
Total		15,025		262		172
Total impaired loans	$	23,290	$	329	$	223

	Average Recorded Investment		Interest Income Recognized		Cash Basis Income Recognized
With no specific allowance recorded
Commercial loans
Multifamily	$	408	$	—	$	—
Nonresidential		809		3		3
Land		9		—		—
Construction		—		—		—
Secured		200		1		1
Unsecured		—		—		—
Total commercial loans		1,426		4		4
Residential mortgage loans
One-to four-family		5,788		35		33
Construction		—		—		—
Total residential mortgage loans		5,788		35		33
Consumer loans
Home equity		1,356		4		4
Auto		10		—		—
Marine		169		—		—
Recreational vehicle		271		3		3
Other		1		—		—
Total consumer loans		1,807		7		7
Total	$	9,021	$	46	$	44
With a specific allowance recorded
Commercial loans
Multifamily	$	—	$	—	$	—
Nonresidential		1,002		26		26
Land		—		—		—
Construction		—		—		—
Secured		—		—		—
Unsecured		—		—		—
Total commercial loans		1,002		26		26
Residential mortgage loans
One-to four-family		10,666		112		112
Construction		—		—		—
Total residential mortgage loans		10,666		112		112
Consumer loans
Home equity		4,987		65		65
Auto		—		—		—
Marine		103		1		1
Recreational vehicle		556		5		5
Other		—		—		—
Total consumer loans		5,646		71		71
Total		17,314		209		209
Total impaired loans	$	26,335	$	255	$	253

Home Savings reclassifies a collateralized mortgage loan and a consumer loan secured by real estate to real estate owned and other repossessed assets once it has either obtained legal title to the real estate collateral or the borrower voluntarily conveys all interest in the real property to the Bank to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The table below presents loans that are in the process of foreclosure at September 30, 2018 and December 31, 2017, but legal title, deed in lieu of foreclosure or similar legal agreement to the property has not yet been obtained:

	September 30, 2018				December 31, 2017
	Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance		Recorded Investment
	(Dollars in thousands)				(Dollars in thousands)
Mortgage loans in process of foreclosure	$	3,982	$	3,735	$	2,588	$	2,428
Consumer loans in process of foreclosure		938		840		613		608

The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days and still on accrual by class of loans as of September 30, 2018:

Nonaccrual Loans and Loans Past Due Over 90 Days and Still Accruing

As of September 30, 2018

	Nonaccrual		Loans past due over 90 days and still accruing
	(Dollars in thousands)
Commercial loans
Multifamily	$	275	$	—
Nonresidential		1,101		—
Land		—		—
Construction		—		—
Secured		1,489		—
Unsecured		—		—
Total commercial loans		2,865		—
Residential mortgage loans
One-to four-family		4,426		—
Construction		—		—
Total residential mortgage loans		4,426		—
Consumer Loans
Home equity		1,431		—
Auto		42		—
Marine		181		—
Recreational vehicle		98		—
Other		18		—
Total consumer loans		1,770		—
Total nonaccrual loans and loans past due over 90 days and still accruing	$	9,061	$	—

The following table presents the recorded investment in nonaccrual loans 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 table presents an age analysis of past-due loans, segregated by class of loans as of September 30, 2018:

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	$	139,663	$	139,938
Nonresidential		—		—		1,087		1,087		407,851		408,938
Land		—		—		—		—		16,129		16,129
Construction		—		—		—		—		132,961		132,961
Secured		95		—		1,489		1,584		225,073		226,657
Unsecured		—		—		—		—		7,144		7,144
Total commercial loans		95		—		2,851		2,946		928,821		931,767
Residential mortgage loans
One-to four-family		3,478		1,757		3,665		8,900		900,726		909,626
Construction		—		—		—		—		39,396		39,396
Total residential mortgage loans		3,478		1,757		3,665		8,900		940,122		949,022
Consumer Loans:
Home equity		516		324		1,352		2,192		185,686		187,878
Automobile		334		35		42		411		81,808		82,219
Marine		—		—		181		181		1,095		1,276
Recreational vehicle		129		8		91		228		4,318		4,546
Other		2		3		18		23		7,166		7,189
Total consumer loans		981		370		1,684		3,035		280,073		283,108
Total loans	$	4,554	$	2,127	$	8,200	$	14,881	$	2,149,016	$	2,163,897

The following table presents 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

As of September 30, 2018 and December 31, 2017, the Company has a recorded investment in troubled debt restructurings of $17.6 million and $19.8 million, respectively. The Company allocated $1.1 million of specific allowance for those loans at September 30, 2018 and $1.6 million at December 31, 2017. The Company has committed to lend, to existing troubled debt restructuring relationships, additional amounts totaling up to $40,000 and $37,000 at September 30, 2018 and December 31, 2017, respectively.

There were no loans modified as troubled debt restructurings during the three months ended September 30, 2018.

The following table presents loans by class modified as troubled debt restructurings that occurred during the three months ended September 30, 2017:

	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		1		147		169
Construction		—		—		—
Total residential mortgage loans		1		147		169
Consumer loans
Home equity		—		—		—
Auto		—		—		—
Marine		—		—		—
Recreational vehicle		—		—		—
Other		—		—		—
Total consumer loans		—		—		—
Total restructured loans		1	$	147	$	169

The troubled debt restructuring described above had no effect on the allowance for loan losses and resulted in no charge-offs during the three months ended September, 2017.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2018:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
			(In thousands)
Commercial loans
Multifamily		—	$	—	$	—
Nonresidential		1		124		124
Land		—		—		—
Construction		—		—		—
Secured		—		—		—
Unsecured		—		—		—
Total commercial loans		1		124		124
Residential mortgage loans
One-to four-family		3		521		547
Construction		—		—		—
Total residential mortgage loans		3		521		547
Consumer loans
Home equity		2		113		113
Auto		—		—		—
Marine		—		—		—
Recreational vehicle		—		—		—
Other		—		—		—
Total consumer loans		2		113		113
Total restructured loans		6	$	758	$	784

The troubled debt restructurings described above increased the allowance for loan losses by $3,000 and resulted in no charge-offs during the nine months ended September 30, 2018.

The following table presents loans by class modified as troubled debt restructurings that occurred during the nine months ended September 30, 2017:

	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Recorded Investment
			(Dollars in thousands)
Commercial loans
Multifamily		—	$	—	$	—
Nonresidential		—		—		—
Land		—		—		—
Construction		—		—		—
Secured		—		—		—
Unsecured		—		—		—
Total commercial loans		—		—		—
Residential mortgage loans
One-to four-family		2		222		253
Construction		—		—		—
Total residential mortgage loans		2		222		253
Consumer loans
Home equity		—		—		—
Auto		—		—		—
Marine		—		—		—
Recreational vehicle		1		115		115
Other		—		—		—
Total consumer loans		1		115		115
Total restructured loans		3	$	337	$	368

The troubled debt restructurings described above increased the allowance for loan losses by $6,000 and resulted in no charge-offs during the nine months ended September 30, 2017.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within a twelve-month cycle following the modification during the period ended September 30, 2018.

	Number of loans		Recorded Investment
			(Dollars in thousands)
Commercial loans
Multifamily		—	$	—
Nonresidential		—		—
Land		—		—
Construction		—		—
Secured		—		—
Unsecured		—		—
Total commercial loans		—		—
Residential mortgage loans
One-to four-family		1		196
Construction		—		—
Total residential mortgage loans		1		196
Consumer loans
Home equity		—		—
Auto		—		—
Marine		—		—
Recreational vehicle		—		—
Other		—		—
Total consumer loans		—		—
Total restructured loans		1	$	196

The troubled debt restructurings that subsequently defaulted described above resulted in no charge-offs during the three and nine months ended September 30, 2018, and had no effect on the provision for loan losses.

The following table presents loans by class modified as troubled debt restructurings for which there was a payment default within a twelve month cycle following the modification during the period ended September 30, 2017:

	Number of loans		Recorded Investment
			(Dollars in thousands)
Commercial loans
Multifamily		—	$	—
Nonresidential		—		—
Land		—		—
Construction		—		—
Secured		—		—
Unsecured		—		—
Total commercial loans		—		—
Residential mortgage loans
One-to four-family		1		162
Construction		—		—
Total residential mortgage loans		1		162
Consumer loans
Home equity		1		47
Auto		—		—
Marine		—		—
Recreational vehicle		—		—
Other		—		—
Total consumer loans		1		47
Total restructured loans		2	$	209

The troubled debt restructurings that subsequently defaulted described above resulted in no charge-offs during the three and nine months ended September 30, 2017, and had no effect on the provision for loan losses.

A troubled debt restructuring is considered to be in payment default once it is 30 days contractually past due under the modified terms.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed in accordance with the Company’s internal underwriting policy.

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as: current financial information, historical payment experience, credit documentation, public information and current economic trends. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes homogeneous loans past due 90 cumulative days, and all non-homogeneous loans, including commercial loans and commercial real estate loans. Smaller balance homogeneous loans are primarily monitored by payment status.

Asset quality ratings are divided into two groups: Pass (unclassified) and Classified. Within the unclassified group, certain loans that display potential weakness are risk rated as special mention. In addition, there are three classified risk ratings: substandard, doubtful and loss. These specific credit risk categories are defined as follows:

Special Mention. Loans classified as special mention have potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loss. Loans classified as loss are considered uncollectible and of such little value, that continuance as assets is not warranted. Although there may be a chance of recovery on these assets, it is not practical or desirable to defer writing off the asset.

The Company monitors loans on a monthly basis to determine if they should be included in one of the categories listed above. All impaired non-homogeneous credits classified as substandard, doubtful or loss are analyzed on an individual basis for a specific reserve requirement. This analysis is performed on each individual credit at least annually or more frequently if warranted.

As of September 30, 2018 and December 31, 2017, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

September 30, 2018

(Dollars in thousands)

	Unclassified				Classified
	Unclassified		Special Mention		Substandard		Doubtful		Loss		Total Classified		Total Loans
Commercial Loans
Multifamily	$	138,378	$	1,285	$	275	$	—	$	—	$	275	$	139,938
Nonresidential		393,138		3,225		12,575		—		—		12,575		408,938
Land		16,129		—		—		—		—		—		16,129
Construction		132,961		—		—		—		—		—		132,961
Secured		205,371		1,862		19,424		—		—		19,424		226,657
Unsecured		7,051		—		93		—		—		93		7,144
Total commercial loans		893,028		6,372		32,367		—		—		32,367		931,767
Residential mortgage loans
One-to four-family		902,809		596		6,221		—		—		6,221		909,626
Construction		39,396		—		—		—		—		—		39,396
Total residential mortgage loans		942,205		596		6,221		—		—		6,221		949,022
Consumer Loans
Home equity		186,448		—		1,430		—		—		1,430		187,878
Auto		82,177		—		42		—		—		42		82,219
Marine		1,095		—		181		—		—		181		1,276
Recreational vehicle		4,448		—		98		—		—		98		4,546
Other		7,168		—		21		—		—		21		7,189
Total consumer loans		281,336		—		1,772		—		—		1,772		283,108
Total loans	$	2,116,569	$	6,968	$	40,360	$	—	$	—	$	40,360	$	2,163,897

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

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:

	September 30, 2018		December 31, 2017
	(Dollars in thousands)
Commercial loans	$	1,083	$	1,194
Residential mortgage loans		—		—
Consumer loans		—		—
Outstanding balance	$	1,083	$	1,194
Carrying amount, net of allowance of $0 and $55,000		1,083		1,139

Accretable yield, or income expected to be collected, is as follows:

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
	(Dollars in thousands)
Beginning of period	$	104	$	116	$	110	$	—
New loans purchased		—		—		—		158
Accretion of income		—		6		6		48
Balance at end of period	$	104	$	110	$	104	$	110

For the purchased credit impaired loans disclosed above, there was a decrease of $55,000 in the allowance for loan losses for the three and nine months ended September 30, 2018 and there was no change in the allowance for loan losses for the three and nine months ended September 30, 2017.

Income is not recognized on purchased credit impaired loans if the Company cannot reasonably estimate cash flows expected to be collected. The carrying amounts of such loans are as follows:

	September 30, 2018		September 30, 2017
	(Dollars in thousands)
Loans at beginning of period	$	1,194	$	—
Loans purchased during the period		—		1,797
Loans at end of period		1,083		1,204