(6) Loans Receivable and Allowance for Loan Losses

The components of loans receivable are as follows:


	June 30,		December 31,
(Dollars in thousands)	2018		2017
Real estate loans:
First mortgages:
One- to four-family residential	$	1,490,465	$	1,444,625
Multi-family residential		10,626		10,799
Construction, commercial and other		24,549		21,787
Home equity loans and lines of credit		12,074		12,882
Total real estate loans		1,537,714		1,490,093
Other loans:
Loans on deposit accounts		281		274
Consumer and other loans		4,207		4,340
Total other loans		4,488		4,614
Less:
Net unearned fees and discounts		(3,196)		(3,188)
Allowance for loan losses		(2,614)		(2,548)
Total unearned fees, discounts and allowance for loan losses		(5,810)		(5,736)
Loans receivable, net	$	1,536,392	$	1,488,971

The table below presents the activity in the allowance for loan losses by portfolio segment:


			Construction,		Home
			Commercial		Equity
			and Other		Loans and
	Residential		Mortgage		Lines of		Consumer
(Dollars in thousands)	Mortgage		Loans		Credit		and Other		Unallocated		Totals
Three months ended June 30, 2018:
Balance, beginning of period	$	1,720	$	530	$	1	$	49	$	254	$	2,554
Provision for loan losses		34		17		—		2		7		60
		1,754		547		1		51		261		2,614
Charge-offs		—		—		—		(7)		—		(7)
Recoveries		6		—		—		1		—		7
Net recoveries (charge-offs)		6		—		—		(6)		—		—
Balance, end of period	$	1,760	$	547	$	1	$	45	$	261	$	2,614

Six months ended June 30, 2018:
Balance, beginning of period	$	1,721	$	539	$	1	$	55	$	232	$	2,548
Provision (reversal of provision) for loan losses		33		8		—		(1)		29		69
		1,754		547		1		54		261		2,617
Charge-offs		—		—		—		(12)		—		(12)
Recoveries		6		—		—		3		—		9
Net recoveries (charge-offs)		6		—		—		(9)		—		(3)
Balance, end of period	$	1,760	$	547	$	1	$	45	$	261	$	2,614


			Construction,		Home
			Commercial		Equity
			and Other		Loans and
	Residential		Mortgage		Lines of		Consumer
(Dollars in thousands)	Mortgage		Loans		Credit		and Other		Unallocated		Totals
Three months ended June 30, 2017:
Balance, beginning of period	$	1,603	$	564	$	1	$	135	$	237	$	2,540
Provision (reversal of provision) for loan losses		(45)		(8)		—		(78)		8		(123)
		1,558		556		1		57		245		2,417
Charge-offs		—		—		—		(7)		—		(7)
Recoveries		44		—		—		3		—		47
Net recoveries (charge-offs)		44		—		—		(4)		—		40
Balance, end of period	$	1,602	$	556	$	1	$	53	$	245	$	2,457

Six months ended June 30, 2017:
Balance, beginning of period	$	1,594	$	519	$	2	$	115	$	222	$	2,452
Provision (reversal of provision) for loan losses		(56)		37		(1)		(55)		23		(52)
		1,538		556		1		60		245		2,400
Charge-offs		(11)		—		—		(12)		—		(23)
Recoveries		75		—		—		5		—		80
Net recoveries (charge-offs)		64		—		—		(7)		—		57
Balance, end of period	$	1,602	$	556	$	1	$	53	$	245	$	2,457

Management considers the allowance for loan losses at June 30, 2018 to be at an appropriate level to provide for probable losses that can be reasonably estimated based on general and specific conditions at that date. While the Company uses the best information it has available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. To the extent actual outcomes differ from the estimates, additional provisions for credit losses may be required that would reduce future earnings. In addition, as an integral part of their examination process, the bank regulators periodically review the allowance for loan losses and may require the Company to increase the allowance based on their analysis of information available at the time of their examination.

The table below presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method:


			Construction,		Home
			Commercial		Equity
			and Other		Loans and
	Residential		Mortgage		Lines of		Consumer
(Dollars in thousands)	Mortgage		Loans		Credit		and Other		Unallocated		Totals
June 30, 2018:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,760		547		1		45		261		2,614
Total ending allowance balance	$	1,760	$	547	$	1	$	45	$	261	$	2,614

Loans:
Ending loan balance:
Individually evaluated for impairment	$	2,851	$	—	$	156	$	—	$	—	$	3,007
Collectively evaluated for impairment		1,495,123		24,453		11,922		4,501		—		1,535,999
Total ending loan balance	$	1,497,974	$	24,453	$	12,078	$	4,501	$	—	$	1,539,006

December 31, 2017:
Allowance for loan losses:
Ending allowance balance:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		1,721		539		1		55		232		2,548
Total ending allowance balance	$	1,721	$	539	$	1	$	55	$	232	$	2,548

Loans:
Ending loan balance:
Individually evaluated for impairment	$	4,977	$	—	$	165	$	—	$	—	$	5,142
Collectively evaluated for impairment		1,447,326		21,701		12,722		4,628		—		1,486,377
Total ending loan balance	$	1,452,303	$	21,701	$	12,887	$	4,628	$	—	$	1,491,519

The table below presents the balance of impaired loans individually evaluated for impairment by class of loans:


			Unpaid
	Recorded		Principal
(Dollars in thousands)	Investment		Balance
June 30, 2018:
With no related allowance recorded:
One- to four-family residential mortgages	$	2,851	$	3,426
Home equity loans and lines of credit		156		226
Total	$	3,007	$	3,652

December 31, 2017:
With no related allowance recorded:
One- to four-family residential mortgages	$	4,977	$	5,897
Home equity loans and lines of credit		165		228
Total	$	5,142	$	6,125

The table below presents the average recorded investment and interest income recognized on impaired loans by class of loans:


	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in thousands)	Investment		Recognized		Investment		Recognized
2018:
With no related allowance recorded:
One- to four-family residential mortgages	$	2,869	$	13	$	2,892	$	27
Home equity loans and lines of credit		158		—		160		—
Total	$	3,027	$	13	$	3,052	$	27

2017:
With no related allowance recorded:
One- to four-family residential mortgages	$	4,205	$	18	$	4,239	$	31
Home equity loans and lines of credit		178		—		180		—
Total	$	4,383	$	18	$	4,419	$	31

There were no loans individually evaluated for impairment with a related allowance for loan loss as of June 30, 2018 or December 31, 2017. Loans individually evaluated for impairment do not have an allocated allowance for loan loss because they were written down to fair value at the time of impairment.

The Company had 12 nonaccrual loans with a book value of $2.1 million at June 30, 2018 and 17 nonaccrual loans with a book value of $4.2 million as of December 31, 2017. The Company collected interest on nonaccrual loans of $52,000 and $87,000 during the six months ended June 30, 2018 and 2017, respectively, but due to regulatory requirements, the Company recorded the interest as a reduction of principal. The Company would have recognized additional interest income of $69,000 and $114,000 during the six months ended June 30, 2018 and 2017, respectively, had the loans been accruing interest. The Company did not have any loans more than 90 days past due and still accruing interest as of June 30, 2018 and December 31, 2017.

The table below presents the aging of loans and accrual status by class of loans:


															Loans
															More Than
															90 Days
	30 - 59		60 - 89		90 Days or										Past Due
	Days Past		Days Past		Greater		Total Past		Loans Not		Total		Nonaccrual		and Still
(Dollars in thousands)	Due		Due		Past Due		Due		Past Due		Loans		Loans		Accruing
June 30, 2018:
One- to four-family residential mortgages	$	—	$	1,298	$	853	$	2,151	$	1,485,214	$	1,487,365	$	1,945	$	—
Multi-family residential mortgages		—		—		—		—		10,609		10,609		—		—
Construction, commercial and other mortgages		—		—		—		—		24,453		24,453		—		—
Home equity loans and lines of credit		—		—		41		41		12,037		12,078		156		—
Loans on deposit accounts		—		—		—		—		281		281		—		—
Consumer and other		3		—		—		3		4,217		4,220		—		—

Total	$	3	$	1,298	$	894	$	2,195	$	1,536,811	$	1,539,006	$	2,101	$	—

December 31, 2017:
One- to four-family residential mortgages	$	—	$	1,207	$	1,589	$	2,796	$	1,438,725	$	1,441,521	$	4,062	$	—
Multi-family residential mortgages		—		—		—		—		10,782		10,782		—		—
Construction, commercial and other mortgages		—		—		—		—		21,701		21,701		—		—
Home equity loans and lines of credit		—		—		41		41		12,846		12,887		165		—
Loans on deposit accounts		—		—		—		—		274		274		—		—
Consumer and other		4		—		—		4		4,350		4,354		—		—

Total	$	4	$	1,207	$	1,630	$	2,841	$	1,488,678	$	1,491,519	$	4,227	$	—

The Company primarily uses the aging of loans and accrual status to monitor the credit quality of its loan portfolio. When a mortgage loan becomes seriously delinquent (90 days or more contractually past due), it displays weaknesses that may result in a loss. As a loan becomes more delinquent, the likelihood of the borrower repaying the loan decreases and the loan becomes more collateral-dependent. A mortgage loan becomes collateral-dependent when the proceeds for repayment can be expected to come only from the sale or operation of the collateral and not from borrower repayments. Generally, appraisals are obtained after a loan becomes collateral-dependent or is four months delinquent. The carrying value of collateral-dependent loans is adjusted to the fair value of the collateral less selling costs. Any commercial real estate, commercial, construction or equity loan that has a loan balance in excess of a specified amount is also periodically reviewed to determine whether the loan exhibits any weaknesses and is performing in accordance with its contractual terms.

There were no loans modified in a troubled debt restructuring during the six months ended June 30, 2018 or 2017. There were no new troubled debt restructurings within the 12 months ended June 30, 2018 that subsequently defaulted.

The table below summarizes troubled debt restructurings by class of loans:


	Number of		Accrual		Number of		Nonaccrual
(Dollars in thousands)	Loans		Status		Loans		Status		Total
June 30, 2018:
One- to four-family residential mortgages		4	$	906		4	$	879	$	1,785
Home equity loans and lines of credit		—		—		1		85		85
Total		4	$	906		5	$	964	$	1,870

December 31, 2017:
One- to four-family residential mortgages		4	$	915		5	$	1,074	$	1,989
Home equity loans and lines of credit		—		—		1		92		92
Total		4	$	915		6	$	1,166	$	2,081

There were no delinquent restructured loans as of June 30, 2018. One of the restructured loans, for $149,000, was more than 149 days delinquent and not accruing interest as of December 31, 2017. Restructurings include deferrals of interest and/or principal payments and temporary or permanent reductions in interest rates due to the financial difficulties of the borrowers. At June 30, 2018, we had no commitments to lend any additional funds to these borrowers.

The Company had no real estate owned as of June 30, 2018 or December 31, 2017. There was one one- to four-family residential mortgage loan for $436,000 and one home equity loan for $41,000 in the process of foreclosure as of June 30, 2018, and three one- to four-family residential mortgage loans totaling $650,000 and one home equity loan for $41,000 in the process of foreclosure as of December 31, 2017.

Nearly all of our real estate loans are collateralized by real estate located in the State of Hawaii. Loan-to-value ratios on these real estate loans generally do not exceed 80% at the time of origination.

During the six months ended June 30, 2018 and 2017, the Company sold $7.0 million and $16.6 million, respectively, of mortgage loans held for sale and recognized gains of $53,000 and $126,000, respectively. The Company did not have any loans held for sale at June 30, 2018. The Company had one loan held for sale for $403,000 at December 31, 2017.

The Company serviced loans for others of $32.3 million at June 30, 2018 and $35.5 million at December 31, 2017. Of these amounts, $1.5 million relate to securitizations for which the Company continues to hold the related mortgage-backed securities at June 30, 2018 and December 31, 2017. The amount of contractually specified servicing fees earned for the six-month periods ended June 30, 2018 and 2017 was $46,000 and $54,000, respectively. The amount of contractually specified servicing fees earned for the three-month periods ended June 30, 2018 and 2017 was $22,000 and $26,000, respectively. The fees are reported in service fees on loan and deposit accounts in the consolidated statements of income.