Loans Receivable and Allowance for Loan Losses

3 Months Ended

Mar. 31, 2024

Loans Receivable and Allowance for Credit Losses

Loans Receivable and Allowance for Credit Losses

(6)      Loans Receivable and Allowance for Credit Losses

The components of loans receivable, net of allowance for credit losses (ACL) as of March 31, 2024 and December 31, 2023 are as follows:

	March 31,		December 31,
(Dollars in thousands)	2024		2023
Real estate loans:
First mortgages:
One- to four-family residential	$	1,275,897	$	1,277,544
Multi-family residential		5,604		5,855
Construction, commercial, and other		12,554		11,631
Home equity loans and lines of credit		9,219		7,058
Total real estate loans		1,303,274		1,302,088
Other loans:
Loans on deposit accounts		180		196
Consumer and other loans		8,305		8,257
Total other loans		8,485		8,453
Total loans		1,311,759		1,310,541
Net unearned fees and discounts		(2,047)		(1,989)
Total loans, net of unearned fees and discounts		1,309,712		1,308,552
Allowance for credit losses		(5,142)		(5,121)
Loans receivable, net of allowance for credit losses	$	1,304,570	$	1,303,431

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

	Real		Commercial		Consumer
(Dollars in thousands)	Estate		Loans		Loans		Unallocated		Totals
Three months ended March 31, 2024:
Balance, beginning of period	$	4,502	$	514	$	105	$	—	$	5,121
(Reversal of provision) provision for credit losses		(26)		12		33		—		19
		4,476		526		138		—		5,140
Charge-offs		(2)		—		(6)		—		(8)
Recoveries		9		—		1		—		10
Net recoveries (charge-offs)		7		—		(5)		—		2
Balance, end of period	$	4,483	$	526	$	133	$	—	$	5,142
Three months ended March 31, 2023:
Balance, beginning of period	$	1,263	$	434	$	76	$	259	$	2,032
Adoption of ASU No. 2016-13		3,393		71		4		(259)		3,209
(Reversal of provision) provision for credit losses		(27)		(88)		15		—		(100)
		4,629		417		95		—		5,141
Charge-offs		—		—		(15)		—		(15)
Recoveries		—		—		1		—		1
Net charge-offs		—		—		(14)		—		(14)
Balance, end of period	$	4,629	$	417	$	81	$	—	$	5,127

The credit loss provisions in the three months ended March 31, 2024 was primarily due to an increase in our consumer and commercial loan portfolios, an increase in forecasted charge-offs in the consumer loan portfolio, and a decrease in forecasted prepayments in the commercial loan portfolio. The reversal of credit loss provisions in the three months ended March 31, 2023 was primarily due to an improvement in economic conditions.

The Company primarily uses the aging of loans to monitor the credit quality of its loan portfolio. The table below presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans as of March 31, 2024.

														Revolving Loans
	Amortized Cost of Term Loans by Origination Year													Amortized
(Dollars in thousands)		2024		2023		2022		2021		2020		Prior		Cost Basis		Total
March 31, 2024:
Commercial
30 - 59 days past due		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		—		—		—
Loans not past due			55		613		336		4,797		—		1,013		1,236		8,050
Total Commercial			55		613		336		4,797		—		1,013		1,236		8,050
Consumer
30 - 59 days past due			9		—		—		—		—		—		—		9
60 - 89 days past due			—		—		—		—		—		—		170		170
90 days or more past due			—		—		—		—		—		—		1		1
Loans not past due			97		46		73		13		3		52		8,194		8,478
Total Consumer			106		46		73		13		3		52		8,365		8,658
Real Estate
30 - 59 days past due			—		—		—		—		—		98		—		98
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		87		—		87
Loans not past due			15,987		90,595		128,031		281,382		182,584		594,240		—		1,292,819
Total Real Estate			15,987		90,595		128,031		281,382		182,584		594,425		—		1,293,004
Total		$	16,148	$	91,254	$	128,440	$	286,192	$	182,587	$	595,490	$	9,601	$	1,309,712

The Company did not have any revolving loans that converted to term loans during the three months ended March 31, 2024.

The table below presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans as of December 31, 2023.

														Revolving Loans
	Amortized Cost of Term Loans by Origination Year													Amortized
(Dollars in thousands)		2023		2022		2021		2020		2019		Prior		Cost Basis		Total
December 31, 2023
Commercial
30 - 59 days past due		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		—		—		—
Loans not past due			387		353		4,836		—		203		856		1,230		7,865
Total Commercial			387		353		4,836		—		203		856		1,230		7,865
Consumer
30 - 59 days past due			4		—		—		—		—		—		—		4
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		—		—		—
Loans not past due			271		80		20		4		14		42		6,137		6,568
Total Consumer			275		80		20		4		14		42		6,137		6,572
Real Estate
30 - 59 days past due			—		—		—		—		—		428		—		428
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		140		87		—		227
Loans not past due			91,195		129,148		283,571		183,887		91,113		514,546		—		1,293,460
Total Real Estate			91,195		129,148		283,571		183,887		91,253		515,061		—		1,294,115
Total		$	91,857	$	129,581	$	288,427	$	183,891	$	91,470	$	515,959	$	7,367	$	1,308,552

The Company did not have any revolving loans that converted to term loans during the year ended December 31, 2023.

The following table presents by loan class and year of origination, the gross charge-offs recorded during the three months ended March 31, 2024 and 2023.

(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Total
Three months ended March 31, 2024:
One- to four-family residential mortgages	$	—	$	—	$	—	$	—	$	—	$	2	$	2
Loans on deposit accounts		—		3		—		—		—		—		3
Consumer and other		—		3		—		—		—		—		3
Total	$	—	$	6	$	—	$	—	$	—	$	2	$	8

(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Total
Three months ended March 31, 2023:
Loans on deposit accounts	$	15	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	15	$	—	$	—	$	—	$	—	$	—	$	—

The table below presents the aging of loans and accrual status by class of loans, net of unearned fees and discounts. Loans with a formal loan payment deferral plan in place are not considered contractually past due or delinquent if the borrower is in compliance with the loan payment deferral plan.

															Loans
															90 Days
															or More
	30 - 59		60 - 89		90 Days or										Past Due
	Days Past		Days Past		More		Total Past		Loans Not		Total		Nonaccrual		and Still
(Dollars in thousands)	Due		Due		Past Due		Due		Past Due		Loans		Loans		Accruing
March 31, 2024:
One- to four-family residential mortgages	$	98	$	—	$	87	$	185	$	1,273,726	$	1,273,911	$	2,026	$	—
Multi-family residential mortgages		—		—		—		—		5,597		5,597		—		—
Construction, commercial, and other mortgages		—		—		—		—		12,493		12,493		—		—
Home equity loans and lines of credit		—		—		—		—		9,221		9,221		9		—
Loans on deposit accounts		—		—		—		—		180		180		—		—
Consumer and other		9		170		1		180		8,130		8,310		170		—
Total	$	107	$	170	$	88	$	365	$	1,309,347	$	1,309,712	$	2,205	$	—
December 31, 2023:
One- to four-family residential mortgages	$	428	$	—	$	227	$	655	$	1,274,960	$	1,275,615	$	2,079	$	—
Multi-family residential mortgages		—		—		—		—		5,848		5,848		—		—
Construction, commercial, and other mortgages		—		—		—		—		11,570		11,570		—		—
Home equity loans and lines of credit		—		—		—		—		7,060		7,060		11		—
Loans on deposit accounts		—		—		—		—		196		196		—		—
Consumer and other		4		—		—		4		8,259		8,263		170		—
Total	$	432	$	—	$	227	$	659	$	1,307,893	$	1,308,552	$	2,260	$	—

The table below presents the amortized cost basis of loans on nonaccrual status as of March 31, 2024 and December 31, 2023.

(Dollars in thousands)	Nonaccrual Loans With a Related ACL		Nonaccrual Loans Without a Related ACL		Total Nonaccrual Loans
March 31, 2024
One- to four-family residential mortgages	$	1,535	$	491	$	2,026
Home equity loans and lines of credit		9		—		9
Consumer and other		170		—		170
Total Nonaccrual Loans and Leases	$	1,714	$	491	$	2,205
December 31, 2023:
One- to four-family residential mortgages	$	1,030	$	1,049	$	2,079
Home equity loans and lines of credit		11		—		11
Consumer and other		170		—		170
Total Nonaccrual Loans and Leases	$	1,211	$	1,049	$	2,260

All payments received while on nonaccrual status are applied against the principal balance of the loan.

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. The amortized cost basis of collateral-dependent loans, excluding accrued interest receivable, was $87,000 and $227,000 at March 31, 2024 and December 31, 2023, respectively. These loans were collateralized by residential real estate in Hawaii. As of March 31, 2024 and December 31, 2023, the fair value of

the collateral less selling costs of these collateral-dependent loans exceeded the amortized cost basis. There was no ACL on collateral-dependent loans.

The Company had no real estate owned as of March 31, 2024 or December 31, 2023. There was one one- to four-family residential mortgage loan for $87,000 in the process of foreclosure at March 31, 2024. There were two one- to four-family residential mortgage loans totaling $227,000 in the process of foreclosure at December 31, 2023.

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 three months ended March 31, 2023, the Company sold mortgage loans held for sale with principal balances of $360,000 and recognized a gain of $1,000. The Company did not sell any mortgage loans in the three months ended March 31, 2024. The Company had no loans held for sale at March 31, 2024 or 2023.

The Company serviced loans for others with principal balances of $32.6 million at March 31, 2024 and $33.2 million at December 31, 2023. Of these amounts, $19.1 million and $19.3 million of loan balances relate to securitizations for which the Company continues to hold the related mortgage-backed securities at March 31, 2024 and December 31, 2023, respectively. The amount of contractually specified servicing fees earned for the three months ended March 31, 2024 and 2023 was $22,000 and $23,000, respectively. The fees are reported in service and other fees in the Consolidated Statements of Income.