| Loans and Allowance for Loan Losses | Note 6: Loans and Allowance for Loan
Losses
Classes of loans include:
March 31, 2016 June 30, 2015
Real estate loans:
One-to four-family, including home equity loans $ 148,797 $ 144,887
Multi-family 84,170 58,399
Commercial 114,458 103,614
Home equity lines of credit 8,197 7,713
Construction 14,288 471
Commercial 55,878 37,151
Consumer 9,164 8,325
Total loans 434,952 360,560
Less:
Unearned fees and discounts, net 87 155
Allowance for loan losses 5,253 4,211
Loans, net $ 429,612 $ 356,194
The Company believes that sound loans are a necessary and desirable
means of employing funds available for investment. Recognizing the
Company’s obligations to its depositors and to the
communities it serves, authorized personnel are expected to seek to
develop and make sound, profitable loans that resources permit and
that opportunity affords. The Company maintains lending policies
and procedures designed to focus our lending efforts on the types,
locations, and duration of loans most appropriate for our business
model and markets. The Company’s lending activity includes
the origination of one-to four-family residential mortgage loans,
multi-family loans, commercial real estate loans, home equity lines
of credits, commercial business loans, consumer loans (consisting
primarily of automobile loans), construction loans and land loans.
The primary lending market includes the Illinois counties of
Vermilion, Iroquois and Champaign, as well as the adjacent counties
in Illinois and Indiana. The Company also has a loan production and
wealth management office in Osage Beach, Missouri, which serves the
Missouri counties of Camden, Miller, and Morgan. Generally, loans
are collateralized by assets, primarily real estate, of the
borrowers and guaranteed by individuals. The loans are
expected to be repaid from cash flows of the borrowers or from
proceeds from the sale of selected assets of the borrowers.
Management reviews and approves the Company’s lending
policies and procedures on a routine basis. Management
routinely (at least quarterly) reviews our allowance for loan
losses and reports related to loan production, loan quality,
concentrations of credit, loan delinquencies and non-performing and
potential problem loans. Our underwriting standards are designed to
encourage relationship banking rather than transactional
banking. Relationship banking implies a primary banking
relationship with the borrower that includes, at minimum, an active
deposit banking relationship in addition to the lending
relationship. The integrity and character of the borrower are
significant factors in our loan underwriting. As a part of
underwriting, tangible positive or negative evidence of the
borrower’s integrity and character are sought
out. Additional significant underwriting factors beyond
location, duration, the sound and profitable cash flow basis
underlying the loan and the borrower’s character are the
quality of the borrower’s financial history, the liquidity of
the underlying collateral and the reliability of the valuation of
the underlying collateral.
The Company’s policies and loan approval limits are
established by the Board of Directors. The loan officers generally
have authority to approve one-to four-family residential mortgage
loans up to $100,000, other secured loans up to $50,000, and
unsecured loans up to $10,000. Managing Officers (those with
designated loan approval authority), generally have authority to
approve one-to four-family residential mortgage loans up to
$300,000, other secured loans up to $300,000, and unsecured loans
up to $100,000. In addition, any two individual officers may
combine their loan authority limits to approve a loan. Our Loan
Committee may approve one-to four-family residential mortgage
loans, commercial real estate loans, multi-family real estate loans
and land loans up to $1,000,000 in aggregate loans, and unsecured
loans up to $300,000. All loans above these limits must be approved
by the Operating Committee, consisting of the Chairman and up to
four other Board members. At no time is a borrower’s total
borrowing relationship to exceed our regulatory lending limit.
Loans to related parties, including executive officers and the
Company’s directors, are reviewed for compliance with
regulatory guidelines and the Board of Directors at least
annually.
The Company conducts internal loan reviews that validate the loans
against the Company’s loan policy quarterly for mortgage,
consumer, and small commercial loans on a sample basis, and all
larger commercial loans on an annual basis. The Company also
receives independent loan reviews performed by a third party on
larger commercial loans to be performed semi-annually. In addition
to compliance with our policy, the third party loan review process
reviews the risk assessments made by our credit department, lenders
and loan committees. Results of these reviews are presented to
management and the Board of Directors.
The Company’s lending can be summarized into six primary
areas; one-to four-family residential mortgage loans, commercial
real estate and multi-family real estate loans, home equity lines
of credit, real estate construction, commercial business loans, and
consumer loans.
One-to four-family Residential Mortgage Loans
The Company offers one-to four-family residential mortgage loans
that conform to Fannie Mae and Freddie Mac underwriting standards
(conforming loans) as well as non-conforming loans. In recent
years there has been an increased demand for long-term fixed-rate
loans, as market rates have dropped and remained near historic
lows. As a result, the Company has sold a substantial portion
of the fixed-rate one-to four-family residential mortgage loans
with terms of 15 years or greater. Generally, the Company
retains fixed-rate one-to four-family residential mortgage loans
with terms of less than 15 years, although this has represented a
small percentage of the fixed-rate loans originated in recent years
due to the favorable long-term rates for borrowers. The
Company also offers USDA Rural Development loans and releases the
servicing.
In addition, the Company also offers home equity loans that are
secured by a second mortgage on the borrower’s primary or
secondary residence. Home equity loans are generally underwritten
using the same criteria used to underwrite one-to four-family
residential mortgage loans.
As one-to four-family residential mortgage and home equity loan
underwriting are subject to specific regulations, the Company
typically underwrites its one-to four-family residential mortgage
and home equity loans to conform to widely accepted
standards. Several factors are considered in underwriting
including the value of the underlying real estate and the debt to
income ratio and credit history of the borrower.
Commercial Real Estate and Multi-Family Real Estate
Loans
Commercial real estate mortgage loans are primarily secured by
office buildings, owner-occupied businesses, strip mall centers,
churches and farm loans secured by real estate. In underwriting
commercial real estate and multi-family real estate loans, the
Company considers a number of factors, which include the projected
net cash flow to the loan’s debt service requirement, the age
and condition of the collateral, the financial resources and income
level of the borrower and the borrower’s experience in owning
or managing similar properties. Personal guarantees are typically
obtained from commercial real estate and multi-family real estate
borrowers. In addition, the borrower’s financial information
on such loans is monitored on an ongoing basis by requiring
periodic financial statement updates. The repayment of these loans
is primarily dependent on the cash flows of the underlying
property. However, the commercial real estate loan generally
must be supported by an adequate underlying collateral
value. The performance and the value of the underlying
property may be adversely affected by economic factors or
geographical and/or industry specific factors. These loans are
subject to other industry guidelines that are closely monitored by
the Company.
Home Equity Lines of Credit
In addition to traditional one-to four-family residential mortgage
loans and home equity loans, the Company offers home equity lines
of credit that are secured by the borrower’s primary or
secondary residence. Home equity lines of credit are generally
underwritten using the same criteria used to underwrite one-to
four-family residential mortgage loans. As home equity lines of
credit underwriting is subject to specific regulations, the Company
typically underwrites its home equity lines of credit to conform to
widely accepted standards. Several factors are considered in
underwriting including the value of the underlying real estate and
the debt to income ratio and credit history of the borrower.
Commercial Business Loans
The Company originates commercial non-mortgage business (term)
loans and lines of credit. These loans are generally originated to
small- and medium-sized companies in the Company’s primary
market area. Commercial business loans are generally used for
working capital purposes or for acquiring equipment, inventory or
furniture, and are primarily secured by business assets other than
real estate, such as business equipment and inventory, accounts
receivable or stock. The Company also offers agriculture loans that
are not secured by real estate.
The commercial business loan portfolio consists primarily of
secured loans. When making commercial business loans, the
Company considers the financial statements, lending history and
debt service capabilities of the borrower, the projected cash flows
of the business and the value of any collateral. The cash
flows of the underlying borrower, however, may not perform
consistently with historical or projected
information. Further, the collateral securing loans may
fluctuate in value due to individual economic or other
factors. Loans are typically guaranteed by the principals of
the borrower. The Company has established minimum standards
and underwriting guidelines for all commercial loan types.
Real Estate Construction Loans
The Company originates construction loans for one-to four-family
residential properties and commercial real estate properties,
including multi-family properties. The Company generally
requires that a commitment for permanent financing be in place
prior to closing the construction loan. The repayment of these
loans is typically through permanent financing following completion
of the construction. Real estate construction loans are
inherently more risky than loans on completed properties as the
unimproved nature and the financial risks of construction
significantly enhance the risks of commercial real estate
loans. These loans are closely monitored and subject to other
industry guidelines.
Consumer Loans
Consumer loans consist of installment loans to individuals,
primarily automotive loans. These loans are underwritten
utilizing the borrower’s financial history, including the
Fair Isaac Corporation (“FICO”) credit scoring and
information as to the underlying collateral. Repayment is
expected from the cash flow of the borrower. Consumer loans
may be underwritten with terms up to seven years, fully
amortized. Unsecured loans are limited to twelve
months. Loan-to-value ratios vary based on the type of
collateral. The Company has established minimum standards and
underwriting guidelines for all consumer loan collateral types.
Loan Concentrations
The loan portfolio includes a concentration of loans secured by
commercial and multi-family real estate properties amounting to
$198,628,000 and $162,013,000 as of March 31, 2016 and June 30,
2015, respectively. Generally, these loans are collateralized
by multi-family and nonresidential properties. The loans are
expected to be repaid from cash flows or from proceeds from the
sale of the properties of the borrower.
Purchased Loans and Loan Participations
The Company’s loans receivable included purchased loans of
$10,782,000 and $11,489,000 at March 31, 2016 and June 30, 2015,
respectively. All of these purchased loans are secured by single
family homes located out of our primary market area primarily in
the Midwest. The Company’s loans receivable also include
commercial loan participations of $46,075,000 and $27,821,000 at
March 31, 2016 and June 30, 2015, respectively, of which
$18,233,000 and $8,814,000, at March 31, 2016 and June 30, 2015
were outside our primary market area.
Allowance for Loan Losses
The following tables present the balance in the allowance for loan
losses and the recorded investment in loans based on portfolio
segment and impairment method as of the three month and nine month
periods ended March 31, 2016 and 2015 and the year ended June 30,
2015:
Three Months
Ended March 31, 2016
Real Estate Loans
One-to Four- Family Multi- Commercial Home Equity
Allowance for loan losses:
Balance, beginning of period $ 1,290 $ 1,146 $ 1,307 $ 115
Provision charged to expense 5 56 36 7
Losses charged off (24 )
—
— (28 )
Recoveries 2
—
—
—
Balance, end of period $ 1,273 $ 1,202 $ 1,343 $ 94
Ending balance: individually evaluated for impairment $ 65 $
— $ 17 $
—
Ending balance: collectively evaluated for impairment $ 1,208 $ 1,202 $ 1,326 $ 94
Loans:
Ending balance $ 148,797 $ 84,170 $ 114,458 $ 8,197
Ending balance: individually evaluated for impairment $ 3,390 $ 1,475 $ 69 $ 332
Ending balance: collectively evaluated for impairment $ 145,407 $ 82,695 $ 114,389 $ 7,865
Three Months
Ended March 31, 2016 (Continued)
Construction Commercial Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of period $ 119 $ 990 $ 83 $
— $ 5,050
Provision charged to expense 42 110 (2 )
— 254
Losses charged off
—
— (1 )
— (53 )
Recoveries
—
—
—
— 2
Balance, end of period $ 161 $ 1,100 $ 80 $
— $ 5,253
Ending balance: individually evaluated for impairment $
— $
— $ 1 $
— $ 83
Ending balance: collectively evaluated for impairment $ 161 $ 1,100 $ 79 $
— $ 5,170
Loans:
Ending balance $ 14,288 $ 55,878 $ 9,164 $
— $ 434,952
Ending balance: individually evaluated for impairment $
— $ 12 $ 3 $
— $ 5,281
Ending balance: collectively evaluated for impairment $ 14,288 $ 55,866 $ 9,161 $
— $ 429,671
Nine Months
Ended March 31, 2016
Real Estate Loans
One-to Four- Family Multi- Commercial Home Equity
Allowance for loan losses:
Balance, beginning of period $ 1,216 $ 827 $ 1,246 $ 85
Provision charged to expense 121 375 97 37
Losses charged off (69 )
—
— (28 )
Recoveries 5
—
—
—
Balance, end of period $ 1,273 $ 1,202 $ 1,343 $ 94
Ending balance: individually evaluated for impairment $ 65 $
— $ 17 $
—
Ending balance: collectively evaluated for impairment $ 1,208 $ 1,202 $ 1,326 $ 94
Loans:
Ending balance $ 148,797 $ 84,170 $ 114,458 $ 8,197
Ending balance: individually evaluated for impairment $ 3,390 $ 1,475 $ 69 $ 332
Ending balance: collectively evaluated for impairment $ 145,407 $ 82,695 $ 114,389 $ 7,865
Nine Months
Ended March 31, 2016 (Continued)
Construction Commercial Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of period $ 6 $ 744 $ 87 $
— $ 4,211
Provision charged to expense 155 356 1
— 1,142
Losses charged off
—
— (9 )
— (106 )
Recoveries
—
— 1
— 6
Balance, end of period $ 161 $ 1,100 $ 80 $
— $ 5,253
Ending balance: individually evaluated for impairment $
— $
— $ 1 $
— $ 83
Ending balance: collectively evaluated for impairment $ 161 $ 1,100 $ 79 $
— $ 5,170
Loans:
Ending balance $ 14,288 $ 55,878 $ 9,164 $
— $ 434,952
Ending balance: individually evaluated for impairment $
— $ 12 $ 3 $
— $ 5,281
Ending balance: collectively evaluated for impairment $ 14,288 $ 55,866 $ 9,161 $
— $ 429,671
Year Ended June 30, 2015 Real Estate Loans
One-to Four- Family Multi-Family Commercial Home Equity
Allowance for loan losses:
Balance, beginning of year $ 1,391 $ 842 $ 968 $ 111
Provision charged to expense 27 (15 ) 278 (4 )
Losses charged off (231 )
—
— (35 )
Recoveries 29
—
— 13
Balance, end of year $ 1,216 $ 827 $ 1,246 $ 85
Ending balance: individually evaluated for impairment $ 57 $
— $ 25 $
—
Ending balance: collectively evaluated for impairment $ 1,159 $ 827 $ 1,221 $ 85
Loans:
Ending balance $ 144,887 $ 58,399 $ 103,614 $ 7,713
Ending balance: individually evaluated for impairment $ 3,274 $ 1,537 $ 46 $ 8
Ending balance: collectively evaluated for impairment $ 141,613 $ 56,862 $ 103,568 $ 7,705
Year Ended June
30, 2015 (Continued)
Construction Commercial Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of year $ 10 $ 543 $ 93 $
— $ 3,958
Provision charged to expense (4 ) 201 (23 )
— 460
Losses charged off
—
— (12 )
— (278 )
Recoveries
—
— 29
— 71
Balance, end of year $ 6 $ 744 $ 87 $
— $ 4,211
Ending balance: individually evaluated for impairment $
— $
— $ 9 $
— $ 91
Ending balance: collectively evaluated for impairment $ 6 $ 744 $ 78 $
— $ 4,120
Loans:
Ending balance $ 471 $ 37,151 $ 8,325 $
— $ 360,560
Ending balance: individually evaluated for impairment $
— $ 21 $ 21 $
— $ 4,907
Ending balance: collectively evaluated for impairment $ 471 $ 37,130 $ 8,304 $
— $ 355,653
Three Months
Ended March 31, 2015
Real Estate Loans
One-to Four- Family Multi- Commercial Home Equity
Allowance for loan losses:
Balance, beginning of period $ 1,408 $ 772 $ 1,078 $ 89
Provision charged to expense 13 22 26 (9 )
Losses charged off (82 )
—
—
—
Recoveries 18
—
— 13
Balance, end of period $ 1,357 $ 794 $ 1,104 $ 93
Ending balance: individually evaluated for impairment $ 174 $
— $ 27 $ 7
Ending balance: collectively evaluated for impairment $ 1,183 $ 794 $ 1,077 $ 86
Loans:
Ending balance $ 145,053 $ 56,147 $ 92,479 $ 7,825
Ending balance: individually evaluated for impairment $ 3,353 $ 1,557 $ 48 $ 7
Ending balance: collectively evaluated for impairment $ 141,700 $ 54,590 $ 92,431 $ 7,818
Three Months
Ended March 31, 2015 (Continued)
Construction Commercial Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of period $ 6 $ 691 $ 94 $
— $ 4,138
Provision charged to expense 1 (22 ) (14 )
— 17
Losses charged off
—
— (2 )
— (84 )
Recoveries
—
— 9
— 40
Balance, end of period $ 7 $ 669 $ 87 $
— $ 4,111
Ending balance: individually evaluated for impairment $
— $
— $ 11 $
— $ 219
Ending balance: collectively evaluated for impairment $ 7 $ 669 $ 76 $
— $ 3,892
Loans:
Ending balance $ 401 $ 32,125 $ 8,600 $
— $ 342,630
Ending balance: individually evaluated for impairment $
— $ 116 $ 21 $
— $ 5,102
Ending balance: collectively evaluated for impairment $ 401 $ 32,009 $ 8,579 $
— $ 337,528
Nine Months
Ended March 31, 2015
Real Estate Loans
One-to Four- Family Multi- Commercial Home Equity
Allowance for loan losses:
Balance, beginning of period $ 1,391 $ 842 $ 968 $ 111
Provision charged to expense 74 (48 ) 136 (3 )
Losses charged off (136 )
—
— (28 )
Recoveries 28
—
— 13
Balance, end of period $ 1,357 $ 794 $ 1,104 $ 93
Ending balance: individually evaluated for impairment $ 174 $
— $ 27 $ 7
Ending balance: collectively evaluated for impairment $ 1,183 $ 794 $ 1,077 $ 86
Loans:
Ending balance $ 145,053 $ 56,147 $ 92,479 $ 7,825
Ending balance: individually evaluated for impairment $ 3,353 $ 1,557 $ 48 $ 7
Ending balance: collectively evaluated for impairment $ 141,700 $ 54,590 $ 92,431 $ 7,818
Nine Months
Ended March 31, 2015 (Continued)
Construction Commercial Consumer Unallocated Total
Allowance for loan losses:
Balance, beginning of period $ 10 $ 543 $ 93 $
— $ 3,958
Provision charged to expense (3 ) 126 (23 )
— 259
Losses charged off
—
— (11 )
— (175 )
Recoveries
—
— 28
— 69
Balance, end of period $ 7 $ 669 $ 87 $
— $ 4,111
Ending balance: individually evaluated for impairment $
— $
— $ 11 $
— $ 219
Ending balance: collectively evaluated for impairment $ 7 $ 669 $ 76 $
— $ 3,892
Loans:
Ending balance $ 401 $ 32,125 $ 8,600 $
— $ 342,630
Ending balance: individually evaluated for impairment $
— $ 116 $ 21 $
— $ 5,102
Ending balance: collectively evaluated for impairment $ 401 $ 32,009 $ 8,579 $
— $ 337,528
Management’s opinion as to the ultimate collectability of
loans is subject to estimates regarding future cash flows from
operations and the value of property, real and personal, pledged as
collateral. These estimates are affected by changing economic
conditions and the economic prospects of borrowers.
The allowance for loan losses represents an estimate of the amount
of losses believed inherent in our loan portfolio at the balance
sheet date. The allowance calculation involves a high degree
of estimation that management attempts to mitigate through the use
of objective historical data where available. Loan losses are
charged against the allowance for loan losses when management
believes the uncollectability of the loan balance is
confirmed. Subsequent recoveries, if any, are credited to the
allowance. Overall, we believe the reserve to be consistent
with prior periods and adequate to cover the estimated losses in
our loan portfolio.
The Company’s methodology for assessing the appropriateness
of the allowance for loan losses consists of two key elements: (1)
specific allowances for estimated credit losses on individual loans
that are determined to be impaired through the Company’s
review for identified problem loans; and (2) a general allowance
based on estimated credit losses inherent in the remainder of the
loan portfolio.
The specific allowance is measured by determining the present value
of expected cash flows, the loan’s observable market value,
or, for collateral-dependent loans, the fair value of the
collateral adjusted for market conditions and selling expense.
Factors used in identifying a specific problem loan include: (1)
the strength of the customer’s personal or business cash
flows; (2) the availability of other sources of repayment; (3) the
amount due or past due; (4) the type and value of collateral; (5)
the strength of the collateral position; (6) the estimated cost to
sell the collateral; and (7) the borrower’s effort to cure
the delinquency. In addition for loans secured by real estate, the
Company also considers the extent of any past due and unpaid
property taxes applicable to the property serving as collateral on
the mortgage.
The Company establishes a general allowance for loans that are not
deemed impaired to recognize the inherent losses associated with
lending activities, but which, unlike specific allowances, has not
been allocated to particular problem assets. The general valuation
allowance is determined by segregating the loans by loan category
and assigning allowance percentages based on the Company’s
historical loss experience and management’s evaluation of the
collectability of the loan portfolio. The allowance is then
adjusted for qualitative factors that, in management’s
judgment, affect the collectability of the portfolio as of the
evaluation date. These qualitative factors may include: (1)
Management’s assumptions regarding the minimal level of risk
for a given loan category; (2) changes in lending policies and
procedures, including changes in underwriting standards, and
charge-off and recovery practices not considered elsewhere in
estimating credit losses; (3) changes in international, national,
regional and local economics and business conditions and
developments that affect the collectability of the portfolio,
including the conditions of various market segments; (4) changes in
the nature and volume of the portfolio and in the terms of loans;
(5) changes in the experience, ability, and depth of the lending
officers and other relevant staff; (6) changes in the volume and
severity of past due loans, the volume of non-accrual loans, the
volume of troubled debt restructured and other loan modifications,
and the volume and severity of adversely classified loans; (7)
changes in the quality of the loan review system; (8) changes in
the value of the underlying collateral for collateral-dependent
loans; (9) the existence and effect of any concentrations of
credit, and changes in the level of such concentrations; and (10)
the effect of other external factors such as competition and legal
and regulatory requirements on the level of estimated credit losses
in the existing portfolio. The applied loss factors are
re-evaluated quarterly to ensure their relevance in the current
environment.
Although the Company’s policy allows for a general valuation
allowance on certain smaller-balance, homogenous pools of loans
classified as substandard, the Company has historically evaluated
every loan classified as substandard, regardless of size, for
impairment as part of the review for establishing specific
allowances. The Company’s policy also allows for general
valuation allowance on certain smaller-balance, homogenous pools of
loans which are loans criticized as special mention or
watch. A separate general allowance calculation is made on
these loans based on historical measured weakness, and which is no
less than twice the amount of the general allowance calculated on
the non-classified loans.
There have been no changes to the Company’s accounting
policies or methodology from the prior periods.
The Company categorizes loans into risk categories based on
relevant information about the ability of borrowers to service
their debt such as current financial information, historical
payment experience, credit documentation, public information and
current economic trends, among other factors. All loans are graded
at inception of the loan. Subsequently, analyses are performed on
an annual basis and grade changes are made as necessary. Interim
grade reviews may take place if circumstances of the borrower
warrant a more timely review. The Company utilizes an internal
asset classification system as a means of reporting problem and
potential problem loans. Under the Company’s risk rating
system, the Company classifies problem and potential problem loans
as “Watch,” “Substandard,”
“Doubtful,” and “Loss.” The Company uses
the following definitions for risk ratings:
Pass –
Watch –
Substandard –
Doubtful –
Loss –
Risk characteristics applicable to each segment of the loan
portfolio are described as follows.
Residential One-to Four-Family and Equity Lines of Credit Real
Estate:
Commercial and Multi-family Real Estate:
Construction Real Estate:
Commercial:
Consumer:
The following tables present the credit risk profile of the
Company’s loan portfolio based on rating category and payment
activity:
Real Estate Loans
One-to Four- Multi-Family Commercial Home Equity Construction Commercial Consumer Total
March 31, 2016:
Pass $ 145,250 $ 82,530 $ 110,518 $ 7,865 $ 14,288 $ 53,347 $ 9,147 $ 422,945
Watch 353 1,278 3,576
—
— 2,518
— 7,725
Substandard 3,194 362 364 332
— 13 17 4,282
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total $ 148,797 $ 84,170 $ 114,458 $ 8,197 $ 14,288 $ 55,878 $ 9,164 $ 434,952
Real Estate Loans
One-to Four- Multi-Family Commercial Home Equity Construction Commercial Consumer Total
June 30, 2015:
Pass $ 141,355 $ 57,989 $ 99,487 $ 7,705 $ 471 $ 36,054 $ 8,304 $ 351,365
Watch 759 170 748
—
— 1,076
— 2,753
Substandard 2,773 240 3,379 8
— 21 21 6,442
Doubtful
—
—
—
—
—
—
—
—
Loss
—
—
—
—
—
—
—
—
Total $ 144,887 $ 58,399 $ 103,614 $ 7,713 $ 471 $ 37,151 $ 8,325 $ 360,560
The Company evaluates the loan risk grading system definitions and
allowance for loan loss methodology on an ongoing basis. No
significant changes were made to either during the past year.
The accrual of interest on loans is discontinued at the time the
loan is 90 days past due unless the credit is well secured and in
process of collection. Past due status is based on contractual
terms of the loan. In all instances, loans are placed on
non-accrual or are charged off at an earlier date if collection of
principal and interest is considered doubtful.
All interest accrued but not collected for loans that are placed on
non-accrual or charged off are reversed against interest
income. The interest on these loans is accounted for on a cash
basis or cost-recovery method, until qualifying for return to
accrual. Loans are returned to accrual status when all
principal and interest amounts contractually due are brought
current and future payments are reasonably assured.
The following tables present the Company’s loan portfolio
aging analysis:
30-59 Days
60-89 Days Past Due 90 Days or Total Past Due Current Total Loans Total Loans
March 31, 2016:
Real estate loans:
One-to four-family $ 1,134 $ 500 $ 2,447 $ 4,081 $ 144,716 $ 148,797 $
—
Multi-family 165 23
— 188 83,982 84,170
—
Commercial 38
— 31 69 114,389 114,458
—
Home equity lines of credit 13 86 320 419 7,778 8,197
—
Construction
—
—
—
— 14,288 14,288
—
Commercial 12
—
— 12 55,866 55,878
—
Consumer 28 7
— 35 9,129 9,164
—
Total $ 1,390 $ 616 $ 2,798 $ 4,804 $ 430,148 $ 434,952 $
—
30-59 Days
60-89 Days Past Due 90 Days or Total Past Due Current Total Loans Total Loans
June 30, 2015:
Real estate loans:
One-to four-family $ 2,129 $ 724 $ 2,279 $ 5,132 $ 139,755 $ 144,887 $ 15
Multi-family 174 31
— 205 58,194 58,399
—
Commercial
— 137
— 137 103,477 103,614
—
Home equity lines of credit 19
—
— 19 7,694 7,713
—
Construction
—
—
—
— 471 471
—
Commercial
— 21
— 21 37,130 37,151
—
Consumer 40
— 21 61 8,264 8,325 7
Total $ 2,362 $ 913 $ 2,300 $ 5,575 $ 354,985 $ 360,560 $ 22
A loan is considered impaired, in accordance with the impairment
accounting guidance (ASC 310-10-35-16), when based on current
information and events, it is probable the Association will be
unable to collect all amounts due from the borrower in accordance
with the contractual terms of the loan. Factors considered by
management in determining impairment include payment status,
collateral value, and the probability of collecting scheduled
principal and interest payments when due. Loans that
experience insignificant payment delays and payment shortfalls
generally are not classified as impaired. Management
determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all
of the circumstances surrounding the loans and the borrower,
including the length of the delay, the reasons for the delay, the
borrower’s prior payment record, and the amount of the
shortfall in relation to the principal and interest owed.
Impairment is measured on a loan-by-loan basis by either the
present value of the expected future cash flows, the loan’s
observable market value, or, for collateral-dependent loans, the
fair value of the collateral adjusted for market conditions and
selling expenses. Significantly restructured loans are considered
impaired in determining the adequacy of the allowance for loan
losses.
The Company actively seeks to reduce its investment in impaired
loans. The primary tools to work through impaired loans are
settlements with the borrowers or guarantors, foreclosure of the
underlying collateral, or restructuring. Included in certain
loan categories in the impaired loans are $2.6 million in troubled
debt restructurings that were classified as impaired.
The following tables present impaired loans:
Three Months Ended March 31, 2016 Nine Months Ended March 31, 2016
Recorded Unpaid Specific Average Interest Interest on Average Interest Interest on
March 31, 2016:
Loans without a specific valuation allowance
Real estate loans:
One-to four-family $ 3,199 $ 3,199 $
— $ 3,213 $ 11 $ 10 $ 3,236 $ 24 $ 29
Multi-family 1,475 1,475
— 1,484 22 23 1,506 52 68
Commercial 31 31
— 30
—
— 30
—
—
Home equity line of credit 332 332
— 346
—
— 348
—
2
Construction
—
—
—
—
—
—
—
—
—
Commercial 12 12
— 14
—
— 17
—
—
Consumer 2 2
— 3
—
— 4
—
—
Loans with a specific valuation allowance
Real estate loans:
One-to four-family 191 191 65 193
—
— 194 2 3
Multi-family
—
—
—
—
—
—
—
—
—
Commercial 38 38 17 39
—
— 42
—
—
Home equity line of credit
—
—
—
—
—
—
—
—
—
Construction
—
—
—
—
—
—
—
—
—
Commercial
—
—
—
—
—
—
—
—
—
Consumer 1 1 1 2
—
— 4
—
—
Total:
Real estate loans:
One-to four-family 3,390 3,390 65 3,406 11 10 3,430 26 32
Multi-family 1,475 1,475
— 1,484 22 23 1,506 52 68
Commercial 69 69 17 69
—
— 72
—
—
Home equity line of credit 332 332
— 346
—
— 348
— 2
Construction
—
—
—
—
—
—
—
—
—
Commercial 12 12
— 14
—
— 17
—
—
Consumer 3 3 1 5
—
— 8
—
—
$ 5,281 $ 5,281 $ 83 $ 5,324 $ 33 $ 33 $ 5,381 $ 78 $ 102
Year Ended June 30, 2015
Recorded Unpaid Specific Average Interest Interest on Cash
June 30, 2015:
Loans without a specific valuation allowance
Real estate loans:
One-to four-family $ 2,801 $ 2,801 $
— $ 2,851 $ 18 $ 31
Multi-family 1,537 1,537
— 1,573 69 92
Commercial
—
—
—
—
—
—
Home equity line of credit 8 8
— 9
—
—
Construction
—
—
—
—
—
—
Commercial 21 21
— 25
—
—
Consumer 6 6
— 9
—
—
Loans with a specific allowance
Real estate loans:
One-to four-family 473 473 57 487 6 11
Multi-family |
