Loans and Allowance for Loan Losses | Note 6: Loans and Allowance for Loan Losses Classes of loans include: December 31, 2016 June 30, 2016 Real estate loans: One- $ 146,490 $ 149,538 Multi-family 83,968 84,200 Commercial 118,762 119,643 Home equity lines of credit 7,585 8,138 Construction 23,501 19,698 Commercial 53,404 57,826 Consumer 8,190 10,086 Total loans 441,900 449,129 Less: Unearned fees and discounts, net (152 ) 30 Allowance for loan losses 5,387 5,351 Loans, net $ 436,665 $ 443,748 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 principal lending activity is the origination of one- 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 The Company’s policies and loan approval limits are established by the Board of Directors. The loan officers generally have authority to approve one- one- one- 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 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- One- The Company offers one- non-conforming one- one- The Company offers USDA Rural Development loans and sells 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- As one- one- 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- one- Commercial Business Loans The Company originates commercial non-mortgage medium-sized 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- 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 Loan Concentration The loan portfolio includes a concentration of loans secured by commercial real estate properties amounting to $224,883,000 and $222,395,000 as of December 31, 2016 and June 30, 2016, 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 $9,103,000 and $9,772,000 at December 31, 2016 and June 30, 2016, respectively. All of these purchased loans are secured by single family homes located out of our primary market area, but still primarily in the Midwest. The Company’s loans receivable also include commercial loan participations of $42,546,000 and $47,731,000 at December 31, 2016 and June 30, 2016, respectively, of which $17,866,000 and $19,303,000, at December 31, 2016 and June 30, 2016 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 six month periods ended December 31, 2016 and 2015 and the year ended June 30, 2016: Three Months Ended December 31, 2016 Real Estate Loans One- to Four-Family Multi-Family Commercial Home Equity Allowance for loan losses: Balance, beginning of period $ 1,176 $ 1,253 $ 1,499 $ 92 Provision charged to expense 20 31 (105 ) (1 ) Losses charged off — — (8 ) — Recoveries 9 — — — Balance, end of period $ 1,205 $ 1,284 $ 1,386 $ 91 Ending balance: individually evaluated for impairment $ 47 $ — $ 9 $ — Ending balance: collectively evaluated for impairment $ 1,158 $ 1,284 $ 1,377 $ 91 Loans: Ending balance $ 146,490 $ 83,968 $ 118,762 $ 7,585 Ending balance: individually evaluated for impairment $ 2,443 $ 1,423 $ 30 $ 10 Ending balance: collectively evaluated for impairment $ 144,047 $ 82,545 $ 118,732 $ 7,575 Three Months Ended December 31, 2016 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of period $ 274 $ 1,068 $ 83 $ — $ 5,445 Provision charged to expense 10 (8 ) 7 — (46 ) Losses charged off — — (16 ) — (24 ) Recoveries — — 3 — 12 Balance, end of period $ 284 $ 1,060 $ 77 $ — $ 5,387 Ending balance: individually evaluated for impairment $ — $ — $ 8 $ — $ 64 Ending balance: collectively evaluated for impairment $ 284 $ 1,060 $ 69 $ — $ 5,323 Loans: Ending balance $ 23,501 $ 53,404 $ 8,190 $ — $ 441,900 Ending balance: individually evaluated for impairment $ — $ 101 $ 8 $ — $ 4,015 Ending balance: collectively evaluated for impairment $ 23,501 $ 53,303 $ 8,182 $ — $ 437,885 Six Months Ended December 31, 2016 Real Estate Loans One- to Four-Family Multi-Family Commercial Home Equity Allowance for loan losses: Balance, beginning of period $ 1,198 $ 1,202 $ 1,399 $ 94 Provision charged to expense (20 ) 82 (5 ) (3 ) Losses charged off — — (8 ) — Recoveries 27 — — — Balance, end of period $ 1,205 $ 1,284 $ 1,386 $ 91 Ending balance: individually evaluated for impairment $ 47 $ — $ 9 $ — Ending balance: collectively evaluated for impairment $ 1,158 $ 1,284 $ 1,377 $ 91 Loans: Ending balance $ 146,490 $ 83,968 $ 118,762 $ 7,585 Ending balance: individually evaluated for impairment $ 2,443 $ 1,423 $ 30 $ 10 Ending balance: collectively evaluated for impairment $ 144,047 $ 82,545 $ 118,732 $ 7,575 Six Months Ended December 31, 2016 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of period $ 227 $ 1,140 $ 91 $ — $ 5,351 Provision charged to expense 57 (80 ) 2 — 33 Losses charged off — — (20 ) — (28 ) Recoveries — — 4 — 31 Balance, end of period $ 284 $ 1,060 $ 77 $ — $ 5,387 Ending balance: individually evaluated for impairment $ — $ — $ 8 $ — $ 64 Ending balance: collectively evaluated for impairment $ 284 $ 1,060 $ 69 $ — $ 5,323 Loans: Ending balance $ 23,501 $ 53,404 $ 8,190 $ — $ 441,900 Ending balance: individually evaluated for impairment $ — $ 101 $ 8 $ — $ 4,015 Ending balance: collectively evaluated for impairment $ 23,501 $ 53,303 $ 8,182 $ — $ 437,885 Year Ended June 30, 2016 Real Estate Loans One- to Four-Family Multi-Family Commercial Home Equity Allowance for loan losses: Balance, beginning of year $ 1,216 $ 827 $ 1,246 $ 85 Provision charged to expense 165 375 156 41 Losses charged off (188 ) — (3 ) (32 ) Recoveries 5 — — — Balance, end of year $ 1,198 $ 1,202 $ 1,399 $ 94 Ending balance: individually evaluated for impairment $ 6 $ — $ 14 $ — Ending balance: collectively evaluated for impairment $ 1,192 $ 1,202 $ 1,385 $ 94 Loans: Ending balance $ 149,538 $ 84,200 $ 119,643 $ 8,138 Ending balance: individually evaluated for impairment $ 2,405 $ 1,457 $ 63 $ 327 Ending balance: collectively evaluated for impairment $ 147,133 $ 82,743 $ 119,580 $ 7,811 Year Ended June 30, 2016 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of year $ 6 $ 744 $ 87 $ — $ 4,211 Provision charged to expense 221 396 12 — 1,366 Losses charged off — — (10 ) — (233 ) Recoveries — — 2 — 7 Balance, end of year $ 227 $ 1,140 $ 91 $ — $ 5,351 Ending balance: individually evaluated for impairment $ — $ — $ — $ — $ 20 Ending balance: collectively evaluated for impairment $ 227 $ 1,140 $ 91 $ — $ 5,331 Loans: Ending balance $ 19,698 $ 57,826 $ 10,086 $ — $ 449,129 Ending balance: individually evaluated for impairment $ — $ 9 $ — $ — $ 4,261 Ending balance: collectively evaluated for impairment $ 19,698 $ 57,817 $ 10,086 $ — $ 444,868 Three Months Ended December 31, 2015 Real Estate Loans One- to Four-Family Multi-Family Commercial Home Equity Allowance for loan losses: Balance, beginning of period $ 1,247 $ 1,064 $ 1,352 $ 85 Provision charged to expense 62 82 (45 ) 30 Losses charged off (22 ) — — — Recoveries 3 — — — Balance, end of period $ 1,290 $ 1,146 $ 1,307 $ 115 Ending balance: individually evaluated for impairment $ 94 $ — $ 20 $ 28 Ending balance: collectively evaluated for impairment $ 1,196 $ 1,146 $ 1,287 $ 87 Loans: Ending balance $ 148,883 $ 80,352 $ 111,189 $ 7,622 Ending balance: individually evaluated for impairment $ 3,437 $ 1,493 $ 72 $ 360 Ending balance: collectively evaluated for impairment $ 145,446 $ 78,859 $ 111,117 $ 7,262 Three Months Ended December 31, 2015 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of period $ 37 $ 798 $ 84 $ — $ 4,667 Provision charged to expense 82 192 5 — 408 Losses charged off — — (7 ) — (29 ) Recoveries — — 1 — 4 Balance, end of period $ 119 $ 990 $ 83 $ — $ 5,050 Ending balance: individually evaluated for impairment $ — $ — $ 3 $ — $ 145 Ending balance: collectively evaluated for impairment $ 119 $ 990 $ 80 $ — $ 4,905 Loans: Ending balance $ 11,020 $ 51,537 $ 9,223 $ — $ 419,826 Ending balance: individually evaluated for impairment $ — $ 15 $ 7 $ — $ 5,384 Ending balance: collectively evaluated for impairment $ 11,020 $ 51,522 $ 9,216 $ — $ 414,442 Six Months Ended December 31, 2015 Real Estate Loans One- to Four-Family Multi-Family Commercial Home Equity Allowance for loan losses: Balance, beginning of period $ 1,216 $ 827 $ 1,246 $ 85 Provision charged to expense 116 319 61 30 Losses charged off (45 ) — — — Recoveries 3 — — — Balance, end of period $ 1,290 $ 1,146 $ 1,307 $ 115 Ending balance: individually evaluated for impairment $ 94 $ — $ 20 $ 28 Ending balance: collectively evaluated for impairment $ 1,196 $ 1,146 $ 1,287 $ 87 Loans: Ending balance $ 148,883 $ 80,352 $ 111,189 $ 7,622 Ending balance: individually evaluated for impairment $ 3,437 $ 1,493 $ 72 $ 360 Ending balance: collectively evaluated for impairment $ 145,446 $ 78,859 $ 111,117 $ 7,262 Six Months Ended December 31, 2015 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of period $ 6 $ 744 $ 87 $ — $ 4,211 Provision charged to expense 113 246 3 — 888 Losses charged off — — (8 ) — (53 ) Recoveries — — 1 — 4 Balance, end of period $ 119 $ 990 $ 83 $ — $ 5,050 Ending balance: individually evaluated for impairment $ — $ — $ 3 $ — $ 145 Ending balance: collectively evaluated for impairment $ 119 $ 990 $ 80 $ — $ 4,905 Loans: Ending balance $ 11,020 $ 51,537 $ 9,223 $ — $ 419,826 Ending balance: individually evaluated for impairment $ — $ 15 $ 7 $ — $ 5,384 Ending balance: collectively evaluated for impairment $ 11,020 $ 51,522 $ 9,216 $ — $ 414,442 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 non-accrual re-evaluated 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 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 charged-off. Risk characteristics applicable to each segment of the loan portfolio are described as follows. Residential One- one- one- 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 Lines of Credit Construction Commercial Consumer Total December 31, 2016: Pass $ 143,051 $ 83,643 $ 117,951 $ 7,575 $ 23,501 $ 50,680 $ 8,106 $ 434,507 Watch 1,144 — 495 — — 2,608 67 4,314 Substandard 2,295 325 316 10 — 116 17 3,079 Doubtful — — — — — — — — Loss — — — — — — — — Total $ 146,490 $ 83,968 $ 118,762 $ 7,585 $ 23,501 $ 53,404 $ 8,190 $ 441,900 Real Estate Loans One- to Four- Multi-Family Commercial Home Equity Lines of Credit Construction Commercial Consumer Total June 30, 2016: Pass $ 146,924 $ 82,580 $ 115,787 $ 7,811 $ 19,698 $ 55,184 $ 10,073 $ 438,057 Watch 350 1,271 3,500 — — 2,633 — 7,754 Substandard 2,264 349 356 327 — 9 13 3,318 Doubtful — — — — — — — — Loss — — — — — — — — Total $ 149,538 $ 84,200 $ 119,643 $ 8,138 $ 19,698 $ 57,826 $ 10,086 $ 449,129 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 charged-off All interest accrued but not collected for loans that are placed on non-accrual charged-off 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 December 31, 2016: Real estate loans: One- $ 1,142 $ 153 $ 1,635 $ 2,930 $ 143,560 $ 146,490 $ 62 Multi-family — — — — 83,968 83,968 — Commercial 91 — — 91 118,671 118,762 — Home equity lines of credit — 3 — 3 7,582 7,585 — Construction — — — — 23,501 23,501 — Commercial — — — — 53,404 53,404 — Consumer 65 6 11 82 8,108 8,190 3 Total $ 1,298 $ 162 $ 1,646 $ 3,106 $ 438,794 $ 441,900 $ 65 30-59 Days 60-89 Days Past Due 90 Days or Total Past Due Current Total Loans Total Loans June 30, 2016: Real estate loans: One- $ 2,061 $ 148 $ 1,489 $ 3,698 $ 145,840 $ 149,538 $ 4 Multi-family 181 — — 181 84,019 84,200 — Commercial — 97 27 124 119,519 119,643 — Home equity lines of credit 39 — 316 355 7,783 8,138 — Construction — — — — 19,698 19,698 — Commercial 33 100 — 133 57,693 57,826 — Consumer 16 5 8 29 10,057 10,086 8 Total $ 2,330 $ 350 $ 1,840 $ 4,520 $ 444,609 $ 449,129 $ 12 A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), case-by-case Impairment is measured on a loan-by-loan 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 $2.4 million in troubled debt restructurings that were classified as impaired. The following tables present impaired loans: Three Months Ended December 31, 2016 Six Months Ended December 31, 2016 Recorded Unpaid Specific Average Interest Interest on Average Interest Interest on December 31, 2016: Loans without a specific valuation allowance Real estate loans: One- to-four $ 2,282 $ 2,282 $ — $ 2,293 $ 12 $ 12 $ 2,304 $ 19 $ 24 Multi-family 1,423 1,423 — 1,432 22 22 1,438 38 46 Commercial — — — — — — — — — Home equity line of credit 10 10 — 10 — — 10 1 — Construction — — — — — — — — — Commercial 101 101 — 106 — — 93 (1 ) — Consumer — — — — — — — — — Loans with a specific valuation allowance Real estate loans: One- to-four 161 161 47 161 (1 ) — 162 — 1 Multi-family — — — — — — — — — Commercial 30 30 9 32 — — 32 — — Home equity line of credit — — — — — — — — — Construction — — — — — — — — — Commercial — — — — — — — — — Consumer 8 8 8 8 — — 8 — — Total: Real estate loans: One- to-four 2,443 2,443 47 2,454 11 12 2,466 19 25 Multi-family 1,423 1,423 — 1,432 22 22 1,438 38 46 Commercial 30 30 9 32 — — 32 — — Home equity line of credit 10 10 — 10 — — 10 1 — Construction — — — — — — — — — Commercial 101 101 — 106 — — 93 (1 ) — Consumer 8 8 8 8 — — 8 — — $ 4,015 $ 4,015 $ 64 $ 4,042 $ 33 $ 34 $ 4,047 $ 57 $ 71 Year Ended June 30, 2016 Recorded Unpaid Specific Average Interest Interest on Cash June 30, 2016: Loans without a specific valuation allowance Real estate loans: One- $ 2,291 $ 2,291 $ — $ 2,338 $ 32 $ 42 Multi-family 1,457 1,457 — 1,497 67 90 Commercial 28 28 — 29 — — Home equity line of credit 327 327 — 346 — 2 Construction — — — — — — Commercial 9 9 — 15 — — Consumer — — — 3 — — Loans with a specific allowance Real estate loans: One- 114 114 6 117 1 2 Multi-family — — — — — — Commercial 35 35 14 40 — — Home equity line of credit — — — — — — Construction — — — — — — Commercial — — — — — — Consumer — — — — — — Total: Real estate loans: One- 2,405 2,405 6 2,455 33 44 Multi-family 1,457 1,457 — 1,497 67 90 Commercial 63 63 14 69 — — Home equity line of credit 327 327 — 346 — 2 Construction — — — — — — Commercial 9 9 — 15 — — Consumer — — — 3 — — $ 4,261 $ 4,261 $ 20 $ 4,385 $ 100 $ 136 Three Months Ended December 31, 2015 Six Months Ended December 31, 2015 Recorded Unpaid Specific Average Interest Interest on Average Interest Interest on December 31, 2015: Loans without a specific valuation allowance Real estate loans: One- to-four $ 3,075 $ 3,075 $ — $ 3,086 $ 8 $ 8 $ 3,095 $ 15 $ 18 Multi-family 1,493 1,493 — 1,502 23 23 1,515 38 45 Commercial 31 31 — 31 — — 30 — — Home equity line of credit 12 12 — 13 — — 14 — 1 Construction — — — — — — — — — Commercial 15 15 — 16 — — 18 — — Consumer 4 4 — 5 — — 5 — — Loans with a specific valuation allowance Real estate loans: One- to-four 362 362 94 365 2 2 368 2 3 Multi-family — — — — — — — — — Commercial 41 41 20 42 — — 44 — — Home equity line of credit 348 348 28 348 (1 ) — 348 (1 ) 1 Construction — — — — — — — — — Commercial — — — — — — — — — Consumer 3 3 3 4 — — 6 — — Total: Real estate loans: One- to-four 3,437 3,437 94 3,451 10 10 3,463 17 21 Multi-family 1,493 1,493 — 1,502 23 23 1,515 38 45 Commercial 72 72 20 73 — — 74 — — Home equity line of credit 360 360 28 361 (1 ) — 362 (1 ) 2 Construction — — — — — — — — — Commercial 15 15 — 16 — — 18 — — Consumer 7 7 3 9 — — 11 — — $ 5,384 $ 5,384 $ 145 $ 5,412 $ 32 $ 33 $ 5,443 $ 54 $ 68 Interest income recognized on impaired loans includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on non-accruing The following table presents the Company’s nonaccrual loans at December 31, 2016 and June 30, 2016: December 31, 2016 June 30, 2016 Mortgages on real estate: One- $ 1,658 $ 1,604 Multi-family 165 185 Commercial 30 63 Home equity lines of credit — 316 Construction — — Commercial 101 9 Consumer 8 — Total $ 1,962 $ 2,177 At December 31, 2016 and June 30, 2016, the Company had a number of loans that were modified in troubled debt restructurings (TDR’s) and impaired. The modification of terms of such loans included one or a combination of the following: an extension of maturity, a reduction of the stated interest rate or a permanent reduction of the recorded investment in the loan. The following table presents the recorded balance, at original cost, of troubled debt restructurings, all of which were performing according to the terms of the restructuring except for one one- one- one- December 31, 2016 June 30, 2016 Real estate loans One- $ 988 $ 984 Multi-family 1,258 1,272 Commercial 7 9 Home equity lines of credit 10 11 Total real estate loans 2,263 2,276 Construction — 0 Commercial 102 9 Consumer — 0 Total $ 2,365 $ 2,285 TDR Modifications During the six month period ended December 31, 2016, three one- During the year ended June 30, 2016, the Company modified one home equity line of credit for $4,000. During the six month period ended December 31, 2015, the Company modified one home equity line of credit loan for $5,000 and one consumer loan in the amount of $4,000. TDR’s with Defaults The Company had one TDR, a one- one- Specific loss allowances are included in the calculation of estimated future loss ratios, which are applied to the various loan portfolios for purposes of estimating future losses. Management considers the level of defaults within the various portfolios, as well as the current adverse economic environment and negative outlook in the real estate and collateral markets when evaluating qualitative adjustments used to determine the adequacy of the allowance for loan losses. We believe the qualitative adjustments more accurately reflect collateral values in light of the sales and economic conditions that we have recently observed. We may obtain physical possession of real estate collateralizing a residential mortgage loan or home equity loan via foreclosure or in-substance |