Loans Receivable and Allowance for Credit Losses

6 Months Ended

Jun. 30, 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 June 30, 2024 and December 31, 2023 are as follows:

	June 30,		December 31,
(Dollars in thousands)	2024		2023
Real estate loans:
First mortgages:
One- to four-family residential	$	1,265,288	$	1,277,544
Multi-family residential		5,488		5,855
Construction, commercial, and other		12,518		11,631
Home equity loans and lines of credit		11,109		7,058
Total real estate loans		1,294,403		1,302,088
Other loans:
Loans on deposit accounts		185		196
Consumer and other loans		8,452		8,257
Total other loans		8,637		8,453
Total loans		1,303,040		1,310,541
Net unearned fees and discounts		(1,983)		(1,989)
Total loans, net of unearned fees and discounts		1,301,057		1,308,552
Allowance for credit losses		(5,118)		(5,121)
Loans receivable, net of allowance for credit losses	$	1,295,939	$	1,303,431

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

	Real Estate		Commercial		Consumer
(Dollars in thousands)	Loans		Loans		Loans		Totals
Three months ended June 30, 2024:
Balance, beginning of period	$	4,483	$	526	$	133	$	5,142
(Reversal of provision) provision for credit losses		(63)		3		34		(26)
		4,420		529		167		5,116
Charge-offs		(3)		—		(14)		(17)
Recoveries		13		—		6		19
Net recoveries (charge-offs)		10		—		(8)		2
Balance, end of period	$	4,430	$	529	$	159	$	5,118
Six months ended June 30, 2024:
Balance, beginning of period	$	4,502	$	514	$	105	$	5,121
(Reversal of provision) provision for credit losses		(89)		15		67		(7)
		4,413		529		172		5,114
Charge-offs		(5)		—		(20)		(25)
Recoveries		22		—		7		29
Net recoveries (charge-offs)		17		—		(13)		4
Balance, end of period	$	4,430	$	529	$	159	$	5,118

	Real Estate		Commercial		Consumer
(Dollars in thousands)	Loans		Loans		Loans		Unallocated		Totals
Three months ended June 30, 2023:
Balance, beginning of period	$	4,629	$	417	$	81	$	—	$	5,127
Provision for credit losses		172		19		21		—		212
		4,801		436		102		—		5,339
Charge-offs		(67)		(15)		—		—		(82)
Recoveries		—		5		—		—		5
Net charge-offs		(67)		(10)		—		—		(77)
Balance, end of period	$	4,734	$	426	$	102	$	—	$	5,262
Six months ended June 30, 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
Provision (reversal of provision) for credit losses		145		(69)		36		—		112
		4,801		436		116		—		5,353
Charge-offs		(67)		(15)		(15)		—		(97)
Recoveries		—		5		1		—		6
Net charge-offs		(67)		(10)		(14)		—		(91)
Balance, end of period	$	4,734	$	426	$	102	$	—	$	5,262

The reversal of provision for credit losses in the three and six months ended June 30, 2024 was primarily due to a decrease in the loans in the real estate portfolio which was partially offset by an increase in loans in the consumer loan portfolio. The provision for credit losses in the three and six months ended June 30, 2023 was primarily due to a decrease in forecasted prepayments and recoveries in the real estate portfolio which increased estimated future losses on real estate loans.

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 June 30, 2024.

														Revolving Loans
	Amortized Cost of Term Loans by Origination Year													Amortized
(Dollars in thousands)		2024		2023		2022		2021		2020		Prior		Cost Basis		Total
June 30, 2024:
Commercial
30 - 59 days past due		$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		—		—		—
Loans not past due			325		592		319		4,757		—		966		1,187		8,146
Total Commercial			325		592		319		4,757		—		966		1,187		8,146
Consumer
30 - 59 days past due			1		—		—		—		—		—		1		2
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		—		—		—
Loans not past due			177		46		62		12		2		48		10,258		10,605
Total Consumer			178		46		62		12		2		48		10,259		10,607
Real Estate
30 - 59 days past due			—		—		152		—		—		255		—		407
60 - 89 days past due			—		—		—		—		—		—		—		—
90 days or more past due			—		—		—		—		—		87		—		87
Loans not past due			26,546		90,431		126,721		277,511		179,258		581,343		—		1,281,810
Total Real Estate			26,546		90,431		126,873		277,511		179,258		581,685		—		1,282,304
Total		$	27,049	$	91,069	$	127,254	$	282,280	$	179,260	$	582,699	$	11,446	$	1,301,057

The Company did not have any revolving loans that converted to term loans during the six months ended June 30, 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 and six months ended June 30, 2024 and 2023.

(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Total
Three months ended June 30, 2024:
One- to four-family residential mortgages	$	—	$	—	$	—	$	—	$	—	$	3	$	3
Loans on deposit accounts		14		—		—		—		—		—		14
Total	$	14	$	—	$	—	$	—	$	—	$	3	$	17
Six months ended June 30, 2024:
One- to four-family residential mortgages	$	—	$	—	$	—	$	—	$	—	$	5	$	5
Loans on deposit accounts		14		3		—		—		—		—		17
Consumer and other		—		2		—		—		—		1		3
Total	$	14	$	5	$	—	$	—	$	—	$	6	$	25

(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Total
Three months ended June 30, 2023:
One- to four-family residential mortgages	$	—	$	—	$	—	$	—	$	10	$	57	$	67
Consumer and other		12		—		—		—		3		—		15
Total	$	12	$	—	$	—	$	—	$	13	$	57	$	82
Six months ended June 30, 2023:
One- to four-family residential mortgages	$	—	$	—	$	—	$	—	$	10	$	57	$	67
Consumer and other		27		—		—		—		3		—		30
Total	$	27	$	—	$	—	$	—	$	13	$	57	$	97

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
June 30, 2024:
One- to four-family residential mortgages	$	407	$	—	$	87	$	494	$	1,262,864	$	1,263,358	$	1,063	$	—
Multi-family residential mortgages		—		—		—		—		5,482		5,482		—		—
Construction, commercial, and other mortgages		—		—		—		—		12,465		12,465		—		—
Home equity loans and lines of credit		—		—		—		—		11,111		11,111		6		—
Loans on deposit accounts		—		—		—		—		185		185		—		—
Consumer and other		2		—		—		2		8,454		8,456		166		—
Total	$	409	$	—	$	87	$	496	$	1,300,561	$	1,301,057	$	1,235	$	—
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 June 30, 2024 and December 31, 2023.

(Dollars in thousands)	Nonaccrual Loans With a Related ACL		Nonaccrual Loans Without a Related ACL		Total Nonaccrual Loans
June 30, 2024
One- to four-family residential mortgages	$	948	$	115	$	1,063
Home equity loans and lines of credit		6		—		6
Consumer and other		166		—		166
Total Nonaccrual Loans and Leases	$	1,120	$	115	$	1,235
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 June 30, 2024 and December 31, 2023, respectively. These loans were collateralized by residential real estate in Hawaii. As of June 30, 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 June 30, 2024 or December 31, 2023. There was one one- to four-family residential mortgage loan for $87,000 in the process of foreclosure at June 30, 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 six months ended June 30, 2023, the Company sold mortgage loans held for sale with principal balances of $827,000 and recognized a gain of $10,000. The Company did not sell any mortgage loans in the six months ended June 30, 2024. The Company had one loan held for sale with a book value of $312,000 at June 30, 2024 and no loans held for sale at June 30, 2023.

The Company serviced loans for others with principal balances of $32.1 million at June 30, 2024 and $33.2 million at December 31, 2023. Of these amounts, $18.8 million and $19.3 million of loan balances relate to securitizations for which the Company continues to hold the related mortgage-backed securities at June 30, 2024 and December 31, 2023, respectively. The amount of contractually specified servicing fees earned for the three months ended June 30, 2024 and 2023 was $21,000 and $23,000, respectively. The amount of contractually specified servicing fees earned for the six months ended June 30, 2024 and 2023 was $43,000 and $46,000, respectively. The fees are reported in service and other fees in the Consolidated Statements of Operations.