Loans | NOTE 5: Loans Loans receivable consisted of the following: December 31, 2015 2014 (In Thousands) First mortgage loans: Residential mortgage (1-4 family) $ 118,133 $ 103,420 Commercial real estate 167,930 116,105 Real estate construction 22,958 10,149 Other loans: Home equity 45,345 40,123 Consumer 14,641 13,827 Commercial 39,072 35,582 Total 408,079 319,206 Allowance for loan losses (3,550 ) (2,450 ) Deferred loan fees, net (795 ) (486 ) Total loans, net $ 403,734 $ 316,270 Within the commercial real estate loan category above, $12,117,000 and $12,612,000 was guaranteed by the United States Department of Agriculture Rural Development at December 31, 2015 and 2014, respectively. In addition, within the commercial loan category above, $1,917,000 and $3,704,000 were in loans originated through a syndication program where the business resides outside of Montana at December 31, 2015 and 2014, respectively. The following table includes information regarding nonperforming assets. December 31, 2015 2014 (Dollars in Thousands) Non-accrual loans $ 2,030 $ 962 Accruing loans delinquent 90 days or more 472 - Restructured loans, net 46 48 Total nonperforming loans 2,548 1,010 Real estate owned and other repossessed assets, net 595 637 Total nonperforming assets $ 3,143 $ 1,647 Total nonperforming assets as a percentage of total assets 0.50 % 0.29 % Allowance for loan losses $ 3,550 $ 2,450 Percent of allowance for loan losses to nonperforming loans 139.32 % 242.57 % Percent of allowance for loan losses to nonperforming assets 112.95 % 148.76 % Allowance for loan losses activity was as follows: Residential Mortgage Commercial Real Estate Home (1-4 Family) Real Estate Construction Equity Consumer Commercial Total (In Thousands) Allowance for loan losses: Beginning balance, January 1, 2015 $ 684 $ 1,098 $ 35 $ 270 $ 46 $ 317 $ 2,450 Charge-offs (137 ) - - - (61 ) (25 ) (223 ) Recoveries - - - 1 18 1 20 Provision 364 495 149 71 63 161 1,303 Ending balance, December 31, 2015 $ 911 $ 1,593 $ 184 $ 342 $ 66 $ 454 $ 3,550 Ending balance, December 31, 2015 allocated to loans individually evaluated for impairment $ - $ - $ - $ 7 $ 11 $ 30 $ 48 Ending balance, December 31, 2015 allocated to loans collectively evaluated for impairment $ 911 $ 1,593 $ 184 $ 335 $ 55 $ 424 $ 3,502 Loans receivable: Ending balance, December 31, 2015 $ 118,133 $ 167,930 $ 22,958 $ 45,345 $ 14,641 $ 39,072 $ 408,079 Ending balance, December 31, 2015 of loans individually evaluated for impairment $ 730 $ 667 $ - $ 207 $ 145 $ 327 $ 2,076 Ending balance, December 31, 2015 of loans collectively evaluated for impairment $ 117,403 $ 167,263 $ 22,958 $ 45,138 $ 14,496 $ 38,745 $ 406,003 Residential Mortgage Commercial Real Estate Home (1-4 Family) Real Estate Construction Equity Consumer Commercial Total (In Thousands) Allowance for loan losses: Beginning balance, July 1, 2014 $ 485 $ 974 $ 30 $ 299 $ 49 $ 288 $ 2,125 Charge-offs - - - (159 ) (65 ) (24 ) (248 ) Recoveries - 31 - - 27 - 58 Provision 199 93 5 130 35 53 515 Ending balance, December 31, 2014 $ 684 $ 1,098 $ 35 $ 270 $ 46 $ 317 $ 2,450 Ending balance, December 31, 2014 allocated to loans individually evaluated for impairment $ 140 $ - $ - $ - $ 7 $ - $ 147 Ending balance, December 31, 2014 allocated to loans collectively evaluated for impairment $ 544 $ 1,098 $ 35 $ 270 $ 39 $ 317 $ 2,303 Loans receivable: Ending balance, December 31, 2014 $ 103,420 $ 116,105 $ 10,149 $ 40,123 $ 13,827 $ 35,582 $ 319,206 Ending balance, December 31, 2014 of loans individually evaluated for impairment $ 1,471 $ - $ - $ 328 $ 55 $ 229 $ 2,083 Ending balance, December 31, 2014 of loans collectively evaluated for impairment $ 101,949 $ 116,105 $ 10,149 $ 39,795 $ 13,772 $ 35,353 $ 317,123 Residential Mortgage Commercial Real Estate Home (1-4 Family) Real Estate Construction Equity Consumer Commercial Total (In Thousands) Allowance for loan losses: Beginning balance, July 1, 2013 $ 423 $ 952 $ 15 $ 290 $ 40 $ 280 $ 2,000 Charge-offs - (199 ) - (73 ) (88 ) (144 ) (504 ) Recoveries - 17 - - 4 - 21 Provision 62 204 15 82 93 152 608 Ending balance, June 30, 2014 $ 485 $ 974 $ 30 $ 299 $ 49 $ 288 $ 2,125 Ending balance, June 30, 2014 allocated to loans individually evaluated for impairment $ - $ - $ - $ 31 $ 20 $ 15 $ 66 Ending balance, June 30, 2014 allocated to loans collectively evaluated for impairment $ 485 $ 974 $ 30 $ 268 $ 29 $ 273 $ 2,059 Loans receivable: Ending balance, June 30, 2014 $ 93,005 $ 91,125 $ 8,454 $ 37,866 $ 12,964 $ 33,115 $ 276,529 Ending balance, June 30, 2014 of loans individually evaluated for impairment $ 660 $ 280 $ - $ 288 $ 101 $ 315 $ 1,644 Ending balance, June 30, 2014 of loans collectively evaluated for impairment $ 92,345 $ 90,845 $ 8,454 $ 37,578 $ 12,863 $ 32,800 $ 274,885 Internal classification of the loan portfolio was as follows: December 31, 2015 Residential Mortgage Commercial Real Estate Home (1-4 Family) Real Estate Construction Equity Consumer Commercial Total (In Thousands) Grade: Pass $ 116,711 $ 167,263 $ 22,176 $ 45,100 $ 14,486 $ 38,675 $ 404,411 Special mention - - - - - - - Substandard 1,422 667 782 156 140 367 3,534 Doubtful - - - 82 4 - 86 Loss - - - 7 11 30 48 Total $ 118,133 $ 167,930 $ 22,958 $ 45,345 $ 14,641 $ 39,072 $ 408,079 Credit risk profile based on payment activity Performing $ 117,182 $ 167,259 $ 22,711 $ 45,138 $ 14,496 $ 38,745 $ 405,531 Restructured loans - - - 46 - - 46 Nonperforming 951 671 247 161 145 327 2,502 Total $ 118,133 $ 167,930 $ 22,958 $ 45,345 $ 14,641 $ 39,072 $ 408,079 December 31, 2014 Residential Mortgage Commercial Real Estate Home (1-4 Family) Real Estate Construction Equity Consumer Commercial Total (In Thousands) Grade: Pass $ 101,949 $ 116,105 $ 10,149 $ 39,795 $ 13,772 $ 35,353 $ 317,123 Special mention - - - - - - - Substandard 1,331 - - 328 41 229 1,929 Doubtful - - - - 7 - 7 Loss 140 - - - 7 - 147 Total $ 103,420 $ 116,105 $ 10,149 $ 40,123 $ 13,827 $ 35,582 $ 319,206 Credit risk profile based on payment activity Performing $ 102,599 $ 116,105 $ 10,149 $ 40,027 $ 13,811 $ 35,505 $ 318,196 Restructured loans - - - 48 - - 48 Nonperforming 821 - - 48 16 77 962 Total $ 103,420 $ 116,105 $ 10,149 $ 40,123 $ 13,827 $ 35,582 $ 319,206 The Company utilizes a 5 point internal loan rating system, largely based on regulatory classifications, for residential mortgage (1-4 family), commercial real estate, real estate construction, home equity, consumer and commercial loans as follows: Loans rated Pass Loans rated Special Mention Loans rated Substandard Loans rated Doubtful Loans rated Loss On an annual basis, or more often if needed, the Company formally reviews the ratings of all commercial real estate, real estate construction and commercial business loans that have a principal balance of $750,000 or more. Quarterly, the Company reviews the rating of any consumer loan, broadly defined, that is delinquent 90 days or more. Likewise, quarterly, the Company reviews the rating of any commercial loan, broadly defined, that is delinquent 60 days or more. Annually, the Company engages an independent third-party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. The following tables include information regarding impaired loans. December 31, 2015 Unpaid Interest Average Recorded Principal Related Income Recorded Investment Balance Allowance Recognized Investment (In Thousands) With no related allowance: Residential mortgage (1-4 family) $ 730 $ 730 $ - $ - $ 690 Commercial real estate 667 667 - - 334 Real estate construction - - - - - Home equity 200 234 - 1 264 Consumer 134 134 - - 91 Commercial 297 297 - - 263 With a related allowance: Residential mortgage (1-4 family) - - - - 411 Commercial real estate - - - - - Real estate construction - - - - - Home equity 7 7 7 - 3 Consumer 11 11 11 - 9 Commercial 30 30 30 - 15 Total: Residential mortgage (1-4 family) 730 730 - - 1,101 Commercial real estate 667 667 - - 334 Real estate construction - - - - - Home equity 207 241 7 1 267 Consumer 145 145 11 - 100 Commercial 327 327 30 - 278 Total $ 2,076 $ 2,110 $ 48 $ 1 $ 2,080 December 31, 2014 Unpaid Interest Average Recorded Principal Related Income Recorded Investment Balance Allowance Recognized Investment (In Thousands) With no related allowance: Residential mortgage (1-4 family) $ 650 $ 650 $ - $ 14 $ 655 Commercial real estate - - - - 140 Real estate construction - - - 2 - Home equity 328 392 - 6 293 Consumer 48 82 - 2 65 Commercial 229 259 - 9 265 With a related allowance: Residential mortgage (1-4 family) 821 821 140 - 411 Commercial real estate - - - - - Real estate construction - - - - - Home equity - - - - 16 Consumer 7 7 7 - 14 Commercial - - - - 8 Total: Residential mortgage (1-4 family) 1,471 1,471 140 14 1,066 Commercial real estate - - - - 140 Real estate construction - - - 2 - Home equity 328 392 - 6 309 Consumer 55 89 7 2 79 Commercial 229 259 - 9 273 Total $ 2,083 $ 2,211 $ 147 $ 33 $ 1,867 The following tables include information regarding delinquencies within the loan portfolio. December 31, 2015 Recorded 90 Days Investment 30-89 Days and Total Total >90 Days and Past Due Greater Past Due Current Loans Still Accruing (In Thousands) Residential mortgage (1-4 family) $ 1,163 $ 951 $ 2,114 $ 116,019 $ 118,133 $ 221 Commercial real estate 177 671 848 167,082 167,930 4 Real estate construction 662 247 909 22,049 22,958 247 Home equity 319 161 480 44,865 45,345 - Consumer 184 145 329 14,312 14,641 - Commercial 173 327 500 38,572 39,072 - Total $ 2,678 $ 2,502 $ 5,180 $ 402,899 $ 408,079 $ 472 December 31, 2014 Recorded 90 Days Investment 30-89 Days and Total Total >90 Days and Past Due Greater Past Due Current Loans Still Accruing (In Thousands) Residential mortgage (1-4 family) $ 203 $ 821 $ 1,024 $ 102,396 $ 103,420 $ - Commercial real estate 131 - 131 115,974 116,105 - Real estate construction - - - 10,149 10,149 - Home equity 303 48 351 39,772 40,123 - Consumer 258 16 274 13,553 13,827 - Commercial 331 77 408 35,174 35,582 - Total $ 1,226 $ 962 $ 2,188 $ 317,018 $ 319,206 $ - Interest income not accrued on these loans and cash interest income was immaterial for CY 2015, the six months ended December 31, 2014 and FY 2014. The allowance for loan losses on non-accrual loans as of December 31, 2015 and 2014 was $48,000 and $147,000, respectively. There were $2,076,000 ($2,028,000 net of loss reserves of $48,000) of loans considered impaired at December 31, 2015. There were $2,083,000 ($1,936,000 net of loss reserves of $147,000) of loans considered impaired at December 31, 2014. Loans are granted to directors and officers of the Company in the ordinary course of business. Such loans are made in accordance with policies established for all loans of the Company, except that directors, officers and employees may be eligible to receive discounts on loan origination costs. Loans receivable (including loans sold and serviced for others) from directors and senior officers and their related parties were as follows: (In Thousands) Balance at July 1, 2013 $ 7,705 Principal additions 166 Principal payments (695) Balance at June 30, 2014 $ 7,176 Principal additions 579 Principal payments (320) Balance at December 31, 2014 $ 7,435 Principal additions 1,073 Principal payments (6,132) Balance at December 31, 2015 $ 2,376 Principal payments for CY 2015 include $5,849,000 related to a previously affiliated entity loan. See Note 19: Related Party Transactions for further information. December 31, 2015 2014 (In Thousands) Loans serviced, for the benefit of others, for directors, senior officers and their related parties $ 1,220 $ 5,714 Year Ended Six Months Ended Year Ended December 31, December 31, June 30, 2015 2014 2014 (In Thousands) Interest income from loans owned for directors, senior officers and their related parties $ 14 $ 42 $ 86 |