Loans Receivable, Net | Loans Receivable Loans receivable consisted of the following at the dates indicated: June 30, 2018 2017 Real estate: One-to-four family $ 62,110 $ 59,735 Multi-family 57,639 60,500 Commercial 150,050 155,525 Construction 85,866 49,151 Land 5,515 8,054 Total real estate 361,180 332,965 Consumer: Home equity 12,291 13,991 Credit cards 2,284 2,596 Automobile 372 627 Other consumer 960 1,524 Total consumer 15,907 18,738 Commercial business 20,329 31,603 Total loans 397,416 383,306 Less: Deferred loan fees and loan premiums, net 1,002 1,292 Allowance for loan losses 4,370 4,106 Loans receivable, net $ 392,044 $ 377,908 A summary of activity in the allowance for loan losses follows: June 30, 2018 2017 2016 Beginning balance $ 4,106 $ 3,779 $ 3,721 Provision for losses 405 310 340 Charge-offs (252 ) (324 ) (957 ) Recoveries 111 341 675 Ending balance $ 4,370 $ 4,106 $ 3,779 The following table presents the activity in the allowance for loan losses by portfolio segment for the year ended June 30, 2018 : One-to- four family Multi- family Commercial real estate Construction Land Consumer (1) Commercial business Unallocated Total Allowance for loan losses : Beginning balance $ 495 $ 580 $ 1,566 $ 651 $ 120 $ 378 $ 316 $ — $ 4,106 Provision (benefit) for loan losses (214 ) 5 112 625 (37 ) (17 ) (69 ) — 405 Charge-offs — — (200 ) — — (52 ) — — (252 ) Recoveries 58 — — 4 — 44 5 — 111 Ending balance $ 339 $ 585 $ 1,478 $ 1,280 $ 83 $ 353 $ 252 $ — $ 4,370 (1) Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2017 : One-to- four family Multi- family Commercial real estate Construction Land Consumer (1) Commercial business Unallocated Total Allowance for loan losses : Beginning balance $ 798 $ 454 $ 1,333 $ 271 $ 75 $ 516 $ 332 $ — $ 3,779 Provision (benefit) for loan losses (494 ) 126 330 327 45 (1 ) (23 ) — 310 Charge-offs (21 ) — (110 ) — — (193 ) — — (324 ) Recoveries 212 — 13 53 — 56 7 — 341 Ending balance $ 495 $ 580 $ 1,566 $ 651 $ 120 $ 378 $ 316 $ — $ 4,106 (1) Consumer loans include home equity, credit cards, auto, 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 year ended June 30, 2016: One-to- four family Multi- Commercial Construction Land Consumer Commercial Unallocated Total Allowance for loan losses: Beginning balance $ 1,113 $ 95 $ 262 $ 247 $ 75 $ 445 $ 1,405 $ 79 $ 3,721 Provision (benefit) for loan losses (251 ) 353 1,295 (325 ) — 343 (996 ) (79 ) 340 Charge-offs (258 ) — (225 ) — — (390 ) (84 ) — (957 ) Recoveries 194 6 1 349 — 118 7 — 675 Ending balance $ 798 $ 454 $ 1,333 $ 271 $ 75 $ 516 $ 332 $ — $ 3,779 (1) Consumer loans include home equity, credit cards, auto, and other consumer loans. The only consumer loans with impairment are home equity loans. The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2018 : Recorded Investments Unpaid Principal Balance Related Allowance With no allowance recorded One-to-four family $ 608 $ 794 $ — Home equity 330 345 — Commercial business 285 366 — With an allowance recorded One-to-four family 2,341 2,351 85 Land 300 300 13 Home equity 150 150 80 Other consumer 14 14 13 Total One-to-four family 2,949 3,145 85 Land 300 300 13 Home equity 480 495 80 Other consumer 14 14 13 Commercial business 285 366 — Total $ 4,028 $ 4,320 $ 191 The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2017 : Recorded Investments Unpaid Principal Balance Related Allowance With no allowance recorded One-to-four family $ 1,818 $ 1,991 $ — Commercial real estate 1,992 1,992 — Home equity 299 303 — Commercial business 606 668 — With an allowance recorded One-to-four family 3,210 3,220 143 Land 311 311 22 Home equity 262 262 32 Commercial business 23 23 1 Total One-to-four family 5,028 5,211 143 Commercial real estate 1,992 1,992 — Land 311 311 22 Home equity 561 565 32 Commercial business 629 691 1 Total $ 8,521 $ 8,770 $ 198 The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2018 : Year Ended June 30, 2018 Average Recorded Investment Interest Income Recognized With no allowance recorded One-to-four family $ 1,213 $ 4 Commercial real estate 996 — Home equity 315 8 Commercial business 446 8 With an allowance recorded One-to-four family 2,776 109 Land 306 19 Home equity 206 7 Commercial business 12 — Total One-to-four family 3,989 113 Commercial real estate 996 — Land 306 19 Home equity 521 15 Commercial business 458 8 Total $ 6,270 $ 155 The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2017 : Year Ended June 30, 2017 Average Recorded Investment Interest Income Recognized With no allowance recorded One-to-four family $ 1,934 $ 51 Commercial real estate 1,156 93 Land 87 — Home equity 180 12 Commercial business 335 43 With an allowance recorded One-to-four family 5,222 147 Land 314 19 Home equity 315 13 Commercial business 74 2 Total One-to-four family 7,156 198 Commercial real estate 1,156 93 Land 401 19 Home equity 495 25 Commercial business 409 45 Total $ 9,617 $ 380 The following table presents the average recorded investment in loans individually evaluated for impairment and the interest income recognized for the year ended June 30, 2016: Year Ended June 30, 2016 Average Recorded Investment Interest Income With no allowance recorded One-to-four family $ 1,913 $ 62 Commercial real estate — 15 Land 210 11 Home equity 63 3 Other consumer 16 — Commercial business 95 9 With an allowance recorded One-to-four family 7,500 310 Land 362 22 Home equity 290 19 Commercial business 503 2 Total One-to-four family 9,413 372 Commercial real estate — 15 Land 572 33 Home equity 353 22 Other consumer 16 — Commercial business 598 11 Total $ 10,952 $ 453 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, 2018 : One-to-four family Multi- family Commercial real estate Construction Land Consumer(1) Commercial business Unallocated Total Allowance for loan losses: Ending balance $ 339 $ 585 $ 1,478 $ 1,280 $ 83 $ 353 $ 252 $ — $ 4,370 Ending balance: individually evaluated for impairment 85 — — — 13 93 — — 191 Ending balance: collectively evaluated for impairment $ 254 $ 585 $ 1,478 $ 1,280 $ 70 $ 260 $ 252 $ — $ 4,179 Loans receivable: Ending balance $ 62,110 $ 57,639 $ 150,050 $ 85,866 $ 5,515 $ 15,907 $ 20,329 $ — $ 397,416 Ending balance: individually evaluated for impairment 2,949 — — — 300 494 285 — 4,028 Ending balance: collectively evaluated for impairment $ 59,161 $ 57,639 $ 150,050 $ 85,866 $ 5,215 $ 15,413 $ 20,044 $ — $ 393,388 (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, 2017 : One-to-four family Multi- family Commercial real estate Construction Land Consumer (1) Commercial business Unallocated Total Allowance for loan losses: Ending balance $ 495 $ 580 $ 1,566 $ 651 $ 120 $ 378 $ 316 $ — $ 4,106 Ending balance: individually evaluated for impairment 143 — — — 22 32 1 — 198 Ending balance: collectively evaluated for impairment $ 352 $ 580 $ 1,566 $ 651 $ 98 $ 346 $ 315 $ — $ 3,908 Loans receivable: Ending balance $ 59,735 $ 60,500 $ 155,525 $ 49,151 $ 8,054 $ 18,738 $ 31,603 $ — $ 383,306 Ending balance: individually evaluated for impairment 5,028 — 1,992 — 311 561 629 — 8,521 Ending balance: collectively evaluated for impairment $ 54,707 $ 60,500 $ 153,533 $ 49,151 $ 7,743 $ 18,177 $ 30,974 $ — $ 374,785 (1) Consumer loans include home equity, credit cards, auto, and other consumer loans. The following table presents the recorded investment in nonaccrual loans and loans past due 90 days still on accrual by type of loans as of the dates indicated: June 30, 2018 2017 One-to-four family $ 507 $ 1,170 Commercial real estate — 1,992 Home equity 207 242 Commercial business 222 300 Total $ 936 $ 3,704 The table above includes $936,000 in nonaccrual and no loans past due 90 days or more and still accruing interest, net of partial loan charge-offs at June 30, 2018 . There were $3.7 million in nonaccrual and no loans past due 90 days or more and still accruing interest, net of partial loan charge-offs at June 30, 2017 . 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. The following table presents past due loans, net of partial loan charge-offs, by class of loans, as of June 30, 2018 : 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due (1) Total Past Due Current Total Loans One-to-four family $ 683 $ 122 $ 507 $ 1,312 $ 60,798 $ 62,110 Multi-family — — — — 57,639 57,639 Commercial real estate — — — — 150,050 150,050 Construction — — — — 85,866 85,866 Land — — — — 5,515 5,515 Home equity 220 — 207 427 11,864 12,291 Credit cards 6 8 — 14 2,270 2,284 Automobile — — — — 372 372 Other consumer 4 — — 4 956 960 Commercial business 9 — 222 231 20,098 20,329 Total $ 922 $ 130 $ 936 $ 1,988 $ 395,428 $ 397,416 (1) Includes loans on nonaccrual status, that may be less than 90 days contractually past due. The following table presents past due loans, net of partial loan charge-offs, by class of loans as of June 30, 2017 : 30-59 Days Past Due 60-89 Days Past Due 90 Days Or More Past Due (1) Total Past Due Current Total Loans One-to-four family $ 15 $ — $ 1,170 $ 1,185 $ 58,550 $ 59,735 Multi-family — — — — 60,500 60,500 Commercial real estate 187 — 1,992 2,179 153,346 155,525 Construction — — — — 49,151 49,151 Land — — — — 8,054 8,054 Home equity 16 4 242 262 13,729 13,991 Credit cards 13 — — 13 2,583 2,596 Automobile — — — — 627 627 Other consumer — 8 — 8 1,516 1,524 Commercial business 107 — 300 407 31,196 31,603 Total $ 338 $ 12 $ 3,704 $ 4,054 $ 379,252 $ 383,306 (1) Includes loans on nonaccrual status, that may be less than 90 days contractually past due. Credit Quality Indicators . The Bank utilizes 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. The Bank uses 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 represents the internally assigned grade as of June 30, 2018 , 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 Grade: Pass $ 60,525 $ 57,315 $ 148,584 $ 85,866 $ 5,515 $ 11,637 $ 2,270 $ 360 $ 951 $ 19,829 $ 392,852 Watch 689 324 1,466 — — 297 14 12 5 278 3,085 Special Mention 389 — — — — 150 — — 4 — 543 Substandard 507 — — — — 207 — — — 222 936 Doubtful — — — — — — — — — — — Total $ 62,110 $ 57,639 $ 150,050 $ 85,866 $ 5,515 $ 12,291 $ 2,284 $ 372 $ 960 $ 20,329 $ 397,416 The following table represents the internally assigned grade as of June 30, 2017 , 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 Grade: Pass $ 57,075 $ 59,973 $ 150,762 $ 49,151 $ 7,743 $ 13,202 $ 2,583 $ 627 $ 1,510 $ 29,972 $ 372,598 Watch 984 527 2,771 — 311 361 13 — 6 1,224 6,197 Special Mention 646 — — — — 36 — — 1 107 790 Substandard 1,030 — 1,992 — — 392 — — 7 300 3,721 Doubtful — — — — — — — — — — — Total $ 59,735 $ 60,500 $ 155,525 $ 49,151 $ 8,054 $ 13,991 $ 2,596 $ 627 $ 1,524 $ 31,603 $ 383,306 Troubled Debt Restructured Loans . A troubled debt restructured ("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. The Bank has utilized a combination of rate and term modifications for its TDRs. The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2018 : June 30, 2018 Accrual Status Nonaccrual Total Modifications One-to-four family $ 2,443 $ 108 $ 2,551 Land 299 — 299 Home equity 124 — 124 Other consumer 14 — 14 Commercial business 63 — 63 Total $ 2,943 $ 108 $ 3,051 The following table represents TDRs by accrual versus nonaccrual status and by class of loans as of June 30, 2017 : June 30, 2017 Accrual Status Nonaccrual Total Modifications One-to-four family $ 3,622 $ 131 $ 3,753 Land 311 — 311 Home equity 169 — 169 Commercial business 87 — 87 Total $ 4,189 $ 131 $ 4,320 There were no new TDR loans, or renewals or modifications of existing TDR loans during the years ended June 30, 2018 and 2017. The following tables present TDRs and their recorded investment prior to the modification and after the modification for TDR transactions that originated during the year ended June 30, 2016: Year Ended June 30, 2016 Number of Pre-TDR Recorded Investment Post -TDR Recorded Investment One-to-four family 1 $ 273 $ 240 Total 1 $ 273 $ 240 There were no TDRs for which there was a payment default within the first 12 months of modification during the years ended June 30, 2018, 2017 and 2016. No additional funds are committed to be advanced in connection with impaired loans at June 30, 2018. |