| Loans Receivable, Net | Note 6 - Loans Receivable, net Loans receivable consisted of the following at the dates indicated: September 30, 2016 June 30, 2016 (In thousands) Real estate: One-to-four family $ 60,067 $ 61,230 Multi-family 54,556 53,742 Commercial 144,402 149,527 Construction 30,635 21,793 Land 7,534 6,839 Total real estate 297,194 293,131 Consumer: Home equity 16,890 16,599 Credit cards 2,871 2,969 Automobile 630 597 Other consumer 1,776 1,933 Total consumer 22,167 22,098 Business: Commercial business 36,688 36,848 Total loans 356,049 352,077 Less: Deferred loan fees and loan premiums, net 1,215 947 Allowance for loan losses 3,824 3,779 Loans receivable, net $ 351,010 $ 347,351 Allowance for Loan Losses. The allowance for loan losses must be maintained at a level necessary to absorb specific losses on impaired loans and probable losses inherent in the loan portfolio. The assessment includes analysis of several different factors, including delinquency, charge-off rates and the changing risk profile of our loan portfolio, as well as local economic conditions such as unemployment rates, bankruptcies and vacancy rates of business and residential properties. The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2016: One-to- four family Multi- family Commercial real estate Construction Land Consumer (1) Commercial business Unallocated Three months ended 9/30/16 (In thousands) Allowance for loan losses : Beginning balance $ 798 $ 454 $ 1,333 $ 271 $ 75 $ 516 $ 332 $ — $ 3,779 Provision (benefit) for loan losses (91 ) 9 (24 ) 108 35 42 (4 ) — 75 Charge-offs — — — — — (54 ) — — (54 ) Recoveries 10 — — 2 — 9 3 — 24 Ending balance $ 717 $ 463 $ 1,309 $ 381 $ 110 $ 513 $ 331 $ — $ 3,824 (1) Consumer loans include home equity, credit cards, automobile, and other consumer loans. The only consumer loans with impairment are home equity loans. The following table presents the activity in the allowance for loan losses by portfolio segment for the three months ended September 30, 2015: One-to- four family Multi- Commercial Construction Land Consumer Commercial Unallocated Three months ended 9/30/15 (In thousands) Allowance for loan losses: Beginning balance $ 1,113 $ 95 $ 262 $ 247 $ 75 $ 445 $ 1,405 $ 79 $ 3,721 Provision (benefit) for loan losses (131 ) 11 417 (140 ) (36 ) 21 (43 ) (79 ) 20 Charge-offs (146 ) — — — — (31 ) (44 ) — (221 ) Recoveries 126 — 1 8 — 31 1 — 167 Ending balance $ 962 $ 106 $ 680 $ 115 $ 39 $ 466 $ 1,319 $ — $ 3,687 (1) Consumer loans include home equity, credit cards, automobile, and other consumer loans. The only consumer loans with impairment are home equity loans. A loan is considered impaired when the Company has determined that it may be unable to collect payments of principal or interest when due under the terms of the loan. In the process of identifying loans as impaired, management takes into consideration factors which include payment history and status, collateral value, financial condition of the borrower, and the probability of collecting scheduled payments in the future. Minor payment delays and insignificant payment shortfalls typically do not result in a loan being classified as impaired. The significance of payment delays and shortfalls is considered by management on a case by case basis, after taking into consideration the totality of circumstances surrounding the loans and the borrowers, including payment history and amounts of any payment shortfall, length and reason for delay, and likelihood of return to stable performance. Impairment is measured on a loan by loan basis for all loans in the portfolio except for the smaller groups of homogeneous consumer loans in the portfolio. The following table presents loans individually evaluated for impairment by class of loans as of September 30, 2016 : Recorded Investments Unpaid Principal Balance Related Allowance (In thousands) With no allowance recorded One-to-four family $ 4,073 $ 4,254 $ — Commercial real estate 315 547 — Land 173 186 — Home equity 80 82 — Commercial business 89 151 — With an allowance recorded One-to-four family $ 4,645 $ 4,700 $ 344 Land 319 319 29 Home equity 364 364 144 Commercial business 96 111 17 Total One-to-four family $ 8,718 $ 8,954 $ 344 Commercial real estate 315 547 — Land 492 505 29 Home equity 444 446 144 Commercial business 185 262 17 Total $ 10,154 $ 10,714 $ 534 The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2016 : Recorded Investments Unpaid Principal Balance Related Allowance (In thousands) With no allowance recorded One-to-four family $ 2,049 $ 2,269 $ — Commercial real estate 319 547 — Land 174 188 — Home equity 60 62 — Commercial business 64 125 — With an allowance recorded One-to-four family $ 7,234 $ 7,284 $ 419 Land 316 316 4 Home equity 367 367 145 Commercial business 124 138 22 Total One-to-four family $ 9,283 $ 9,553 $ 419 Commercial real estate 319 547 — Land 490 504 4 Home equity 427 429 145 Commercial business 188 263 22 Total $ 10,707 $ 11,296 $ 590 The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the three months ended September 30, 2016 and 2015: Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized (In thousands) With no allowance recorded One-to-four family $ 3,152 $ 14 $ 2,076 $ 4 Commercial real estate 433 — — — Land 180 1 219 1 Home equity 71 — 65 — Commercial business 108 1 217 1 With an allowance recorded One-to-four family $ 5,967 $ 16 $ 7,727 $ 27 Land 318 7 365 7 Home equity 366 1 221 1 Commercial business 118 — 823 — Total One-to-four family $ 9,119 $ 30 $ 9,803 $ 31 Commercial real estate 433 — — — Land 498 8 584 8 Home equity 437 1 286 1 Commercial business 226 1 1,040 1 Total $ 10,713 $ 40 $ 11,713 $ 41 The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of September 30, 2016 : One-to-four family Multi- family Commercial real estate Construction Land Consumer(1) Commercial business Unallocated Total (In thousands) Allowance for loan losses: Ending balance $ 717 $ 463 $ 1,309 $ 381 $ 110 $ 513 $ 331 $ — $ 3,824 Ending balance: individually evaluated for impairment 344 — — — 29 144 17 — 534 Ending balance: collectively evaluated for impairment $ 373 $ 463 $ 1,309 $ 381 $ 81 $ 369 $ 314 $ — $ 3,290 Loans receivable: Ending balance $ 60,067 $ 54,556 $ 144,402 $ 30,635 $ 7,534 $ 22,167 $ 36,688 $ — $ 356,049 Ending balance: individually evaluated for impairment 8,718 — 315 — 492 444 185 — 10,154 Ending balance: collectively evaluated for impairment $ 51,349 $ 54,556 $ 144,087 $ 30,635 $ 7,042 $ 21,723 $ 36,503 $ — $ 345,895 (1) Consumer loans include home equity, credit cards, auto and other consumer loans. The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of June 30, 2016: One-to-four family Multi- family Commercial real estate Construction Land Consumer(1) Commercial business Unallocated Total (In thousands) Allowance for loan losses: Ending balance $ 798 $ 454 $ 1,333 $ 271 $ 75 $ 516 $ 332 $ — $ 3,779 Ending balance: individually evaluated for impairment 419 — — — 4 145 22 — 590 Ending balance: collectively evaluated for impairment $ 379 $ 454 $ 1,333 $ 271 $ 71 $ 371 $ 310 $ — $ 3,189 Loans receivable: Ending balance $ 61,230 $ 53,742 $ 149,527 $ 21,793 $ 6,839 $ 22,098 $ 36,848 $ — $ 352,077 Ending balance: individually evaluated for impairment 9,283 — 319 — 490 427 188 — 10,707 Ending balance: collectively evaluated for impairment $ 51,947 $ 53,742 $ 149,208 $ 21,793 $ 6,349 $ 21,671 $ 36,660 $ — $ 341,370 (1) Consumer loans include home equity, credit cards, auto, and other consumer loans. Nonaccrual and Past Due Loans . Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual when, in management's opinion, the borrower may be unable to meet payment of obligations as they become due, as well as when required by regulatory provisions. The following table presents the recorded investment in nonaccrual loans by type of loans as of the dates indicated: September 30, 2016 June 30, 2016 (In thousands) One-to-four family $ 2,010 $ 1,539 Commercial 315 319 Home equity 37 16 Other consumer — 1 Commercial business 96 97 Total $ 2,458 $ 1,972 There were no loans past due 90 days or more and still accruing interest at September 30, 2016 and June 30, 2016. The following table presents past due loans, net of partial loan charge-offs, by class of loan, as of September 30, 2016 : 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due (1) Total Past Due Current Total Loans (In thousands) One-to-four family $ 578 $ 355 $ 2,010 $ 2,943 $ 57,124 $ 60,067 Multi-family — — — — 54,556 54,556 Commercial real estate — — 315 315 144,087 144,402 Construction — — — — 30,635 30,635 Land — — — — 7,534 7,534 Home equity 44 64 37 145 16,745 16,890 Credit cards 17 — — 17 2,854 2,871 Automobile — — — — 630 630 Other consumer 7 — — 7 1,769 1,776 Commercial business — — 96 96 36,592 36,688 Total $ 646 $ 419 $ 2,458 $ 3,523 $ 352,526 $ 356,049 (1) Includes loans on nonaccrual status. The following table presents past due loans, net of partial loan charge-offs, by class of loan as of June 30, 2016 : 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due (1) Total Past Due Current Total Loans (In thousands) One-to-four family $ 566 $ 623 $ 1,539 $ 2,728 $ 58,502 $ 61,230 Multi-family — — — — 53,742 53,742 Commercial real estate — — 319 319 149,208 149,527 Construction — — — — 21,793 21,793 Land — — — — 6,839 6,839 Home equity 14 8 16 38 16,561 16,599 Credit cards 77 — — 77 2,892 2,969 Automobile 1 — — 1 596 597 Other consumer 12 — 1 13 1,920 1,933 Commercial business — — 97 97 36,751 36,848 Total $ 670 $ 631 $ 1,972 $ 3,273 $ 348,804 $ 352,077 (1) Includes loans on nonaccrual status. Credit Quality Indicators. We utilize a ten-point risk rating system and assign a risk rating for all credit exposures. The risk rating system is designed to define the basic characteristics and identify risk elements of each credit extension. Credits risk rated 1 through 7 are considered to be “pass” credits. Pass credits can be assets where there is virtually no credit risk, such as cash secured loans with funds on deposit with the Bank. Pass credits also include credits that are on our watch and special mention lists, where the borrower exhibits potential weaknesses, which may, if not checked or corrected, negatively affect the borrower's financial capacity and threaten their ability to fulfill debt obligations in the future. A seasoned loan with a Debt Service Coverage Ratio ("DSCR") of greater than 1.00 is the minimum acceptable level for a "Pass Credit". Particular attention is paid to the coverage trend analysis as any loan with a declining DSCR trend may warrant a higher risk grade even if the current coverage is at or above the 1.00 threshold. Credits classified as Watch are risk rated 6 and possess weaknesses that deserve management's close attention. These assets do not expose the Bank to sufficient risk to warrant adverse classification in the substandard, doubtful or loss categories. We use this rating when a material documentation deficiency exists but correction is anticipated within an acceptable time frame. A loan classified as Watch may have the following characteristics: • Acceptable asset quality, but requiring increased monitoring. Strained liquidity and less than anticipated performance. The loan may be fully leveraged. • Apparent management weakness, perhaps demonstrated by an irregular flow of adequate and/or timely performance information required to support the credit. • The borrower has a plausible plan to correct problem(s) in the near future that is devoid of material uncertainties. • Lacks reserve capacity, so the risk rating will improve or decline in relatively short time (results of corrective actions should be apparent within six months or less). Credits classified as Special Mention are risk rated 7. These credits have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset. Special Mention assets are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. A loan classified as Special Mention may have the following characteristics: • Performance is poor or significantly less than expected. A debt service deficiency either exists or cannot be ruled out. • Generally an undesirable business credit. Assets in this category are protected, but are potentially weak. These assets constitute an undue and unwarranted credit risk, but not to the point of justifying a classification of Substandard. Special Mention assets have potential weaknesses which may, if not checked or corrected, weaken the asset or inadequately protect the Bank's credit position at some future date. • Assets which might be detailed in this category include credits that the lending officer may be unable to supervise properly because of lack of expertise, an inadequate loan agreement, the condition of and control over collateral, failure to obtain proper documentation, or any other deviations from prudent lending practices. • An adverse trend in the borrower's operations or an imbalanced position in the balance sheet which does not jeopardize liquidation may best be handled by this classification. • A Special Mention classification should not be used as a compromise between a pass and substandard rating. Assets in which actual, not potential, weaknesses are evident and significant, and should be considered for more serious criticism. A loan classified as Substandard is risk rated 8. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. An asset is considered Substandard if it is inadequately protected by the current net worth and payment capacity of the borrower or of any collateral pledged. A loan classified as Substandard may have the following characteristics: • Unacceptable business credit. The asset is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Assets so classified must have a well defined weakness or weaknesses that jeopardize the liquidation of the debt. • Though no loss is envisioned, the outlook is sufficiently uncertain to preclude ruling out the possibility. Some liquidation of assets will likely be necessary as a corrective measure. • Assets in this category may demonstrate performance problems such as debt servicing deficiencies with no immediate relief, including having a DSCR of less than 1.00 . Borrowers have an inability to adjust to prolonged and unfavorable industry or economic trends. Management's character and/or effectiveness have become suspect. A loan classified as Doubtful is risk rated 9 and has all the inherent weaknesses as those classified 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 is improbable. A loan classified as Doubtful is risk rated 9 and has the following characteristics: • The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined. • Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. A loan risk rated 10 is a loan for which a total loss is expected. A loan classified as a Loss has the following characteristics: • An uncollectible asset or one of such little value that it does not warrant classification as an active, earning asset. Such an asset may, however, have recovery or salvageable value, but not to the point of deferring full write off, even though some recovery may occur in the future. • The Bank will charge off such assets as a loss during the accounting period in which they were identified. • Loan to be eliminated from the active loan reporting system via charge off. The following table presents the internally assigned grade as of September 30, 2016 , by class of loans: One-to- four family Multi- family Commercial real estate Construction Land Home equity Credit cards Automobile Other consumer Commercial business Total (In thousands) Grade: Pass $ 55,006 $ 53,821 $ 140,554 $ 30,635 $ 7,042 $ 16,365 $ 2,854 $ 630 $ 1,757 $ 35,102 $ 343,766 Watch 1,683 735 3,533 — 319 230 17 — 18 1,401 7,936 Special Mention 856 — — — 173 44 — — — 89 1,162 Substandard 2,522 — 315 — — 251 — — 1 96 3,185 Doubtful — — — — — — — — — — — Total $ 60,067 $ 54,556 $ 144,402 $ 30,635 $ 7,534 $ 16,890 $ 2,871 $ 630 $ 1,776 $ 36,688 $ 356,049 The following table presents the internally assigned grade as of June 30, 2016 , by class of loans: One-to- four family Multi-family Commercial real estate Construction Land Home equity Credit cards Automobile Other consumer Commercial business Total (In thousands) Grade: Pass $ 52,438 $ 53,002 $ 146,587 $ 21,793 $ 6,349 $ 15,377 $ 2,892 $ 542 $ 1,839 $ 35,149 $ 335,968 Watch 4,875 740 1,978 — 316 836 77 55 94 1,005 9,976 Special Mention 1,789 — 644 — 174 220 — — — 533 3,360 Substandard 2,128 — 318 — — 166 — — — 161 2,773 Doubtful — — — — — — — — — — — Total $ 61,230 $ 53,742 $ 149,527 $ 21,793 $ 6,839 $ 16,599 $ 2,969 $ 597 $ 1,933 $ 36,848 $ 352,077 Troubled Debt Restructures . A troubled debt restructure ("TDR") is a loan where the Company, for economic or legal reasons related to the borrower's financial condition, has granted a concession to the borrower that it would otherwise not consider so that the borrower can continue to make payments while minimizing the Company's potential loss. The modifications have included items such as lowering the interest rate on the loan for a period of time and extending the maturity date of the loan. These modifications are made only when there is a reasonable and attainable workout plan that has been agreed to by the borrower and is in the Bank's best interest. At September 30, 2016 , there were no commitments to lend additional funds to borrowers whose loans have been modified in a TDR. The following table presents TDRs by accrual versus nonaccrual status and by loan class as of September 30, 2016 : September 30, 2016 Accrual Status Nonaccrual Total Modifications (In thousands) One-to-four family $ 6,292 $ 758 $ 7,050 Land 492 — 492 Home equity 257 — 257 Commercial business 89 — 89 Total $ 7,130 $ 758 $ 7,888 The following table presents TDRs by accrual versus nonaccrual status and by loan class as of June 30, 2016 : June 30, 2016 Accrual Status Nonaccrual Total Modifications (In thousands) One-to-four family $ 7,503 $ 411 $ 7,914 Land 490 — 490 Home equity 261 — 261 Commercial business 90 — 90 Total $ 8,344 $ 411 $ 8,755 There were no TDR loans, or renewals or modifications of existing TDR loans during the three months ended September 30, 2016 and 2015. For both the three months ended September 30, 2016 and 2015, there were no TDRs for which there was a payment default within 12 months of their restructure. |
