Loans and Allowance for Loan Losses | Note 6: Loans and Allowance for Loan Losses Classes of loans include: March 31, 2017 June 30, 2016 Real estate loans: One-to $ 144,718 $ 149,538 Multi-family 78,288 84,200 Commercial 121,227 119,643 Home equity lines of credit 7,452 8,138 Construction 25,647 19,698 Commercial 57,801 57,826 Consumer 8,010 10,086 Total loans 443,143 449,129 Less: Unearned fees and discounts, net (169 ) 30 Allowance for loan losses 5,366 5,351 Loans, net $ 437,946 $ 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 lending activity includes the origination of one-to 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-to one-to one-to 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 One-to The Company offers one-to 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-to As one-to one-to 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 one-to 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-to 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 and multi-family real estate properties amounting to $223,641,000 and $222,395,000 as of March 31, 2017 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 $8,715,000 and $9,772,000 at March 31, 2017 and June 30, 2016, 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 $37,355,000 and $47,731,000 at March 31, 2017 and June 30, 2016, respectively, of which $16,954,000 and $19,303,000, at March 31, 2017 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 nine month periods ended March 31, 2017 and 2016 and the year ended June 30, 2016: Three Months Ended March 31, 2017 Real Estate Loans One-to Four- Family Multi- Commercial Home Equity Lines of Credit Allowance for loan losses: Balance, beginning of period $ 1,205 $ 1,284 $ 1,386 $ 91 Provision charged to expense 158 (87 ) 24 — Losses charged off (203 ) — — — Recoveries — — — — Balance, end of period $ 1,160 $ 1,197 $ 1,410 $ 91 Ending balance: individually evaluated for impairment $ — $ — $ 7 $ — Ending balance: collectively evaluated for impairment $ 1,160 $ 1,197 $ 1,403 $ 91 Loans: Ending balance $ 144,718 $ 78,288 $ 121,227 $ 7,452 Ending balance: individually evaluated for impairment $ 2,298 $ 1,406 $ 27 $ 9 Ending balance: collectively evaluated for impairment $ 142,420 $ 76,882 $ 121,200 $ 7,443 Three Months Ended March 31, 2017 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of period $ 284 $ 1,060 $ 77 $ — $ 5,387 Provision charged to expense 20 78 (1 ) — 192 Losses charged off — — (11 ) — (214 ) Recoveries — — 1 — 1 Balance, end of period $ 304 $ 1,138 $ 66 $ — $ 5,366 Ending balance: individually evaluated for impairment $ — $ — $ — $ — $ 7 Ending balance: collectively evaluated for impairment $ 304 $ 1,138 $ 66 $ — $ 5,359 Loans: Ending balance $ 25,647 $ 57,801 $ 8,010 $ — $ 443,143 Ending balance: individually evaluated for impairment $ — $ 93 $ — $ — $ 3,833 Ending balance: collectively evaluated for impairment $ 25,647 $ 57,708 $ 8,010 $ — $ 439,310 Nine Months Ended March 31, 2017 Real Estate Loans One-to Four- Family Multi- Commercial Home Equity Lines of Credit Allowance for loan losses: Balance, beginning of period $ 1,198 $ 1,202 $ 1,399 $ 94 Provision charged to expense 138 (5 ) 19 (3 ) Losses charged off (203 ) — (8 ) — Recoveries 27 — — — Balance, end of period $ 1,160 $ 1,197 $ 1,410 $ 91 Ending balance: individually evaluated for impairment $ — $ — $ 7 $ — Ending balance: collectively evaluated for impairment $ 1,160 $ 1,197 $ 1,403 $ 91 Loans: Ending balance $ 144,718 $ 78,288 $ 121,227 $ 7,452 Ending balance: individually evaluated for impairment $ 2,298 $ 1,406 $ 27 $ 9 Ending balance: collectively evaluated for impairment $ 142,420 $ 76,882 $ 121,200 $ 7,443 Nine Months Ended March 31, 2017 (Continued) Construction Commercial Consumer Unallocated Total Allowance for loan losses: Balance, beginning of period $ 227 $ 1,140 $ 91 $ — $ 5,351 Provision charged to expense 77 (2 ) 1 — 225 Losses charged off — — (31 ) — (242 ) Recoveries — — 5 — 32 Balance, end of period $ 304 $ 1,138 $ 66 $ — $ 5,366 Ending balance: individually evaluated for impairment $ — $ — $ — $ — $ 7 Ending balance: collectively evaluated for impairment $ 304 $ 1,138 $ 66 $ — $ 5,359 Loans: Ending balance $ 25,647 $ 57,801 $ 8,010 $ — $ 443,143 Ending balance: individually evaluated for impairment $ — $ 93 $ — $ — $ 3,833 Ending balance: collectively evaluated for impairment $ 25,647 $ 57,708 $ 8,010 $ — $ 439,310 Year Ended June 30, 2016 Real Estate Loans One-to Four- Family Multi-Family Commercial Home Equity Lines of Credit 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 March 31, 2016 Real Estate Loans One-to Four- Family Multi- Commercial Home Equity Lines of Credit 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 Lines of Credit 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 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 Risk characteristics applicable to each segment of the loan portfolio are described as follows. Residential One-to one-to one-to 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- Family Multi-Family Commercial Home Equity Lines of Credit Construction Commercial Consumer Total March 31, 2017: Pass $ 141,360 $ 77,975 $ 120,923 $ 7,428 $ 25,647 $ 55,988 $ 7,941 $ 437,262 Watch 1,271 — — 9 — 1,710 69 3,059 Substandard 2,087 313 304 15 — 103 — 2,822 Doubtful — — — — — — — — Loss — — — — — — — — Total $ 144,718 $ 78,288 $ 121,227 $ 7,452 $ 25,647 $ 57,801 $ 8,010 $ 443,143 Real Estate Loans One-to 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 All interest accrued but not collected for loans that are placed on non-accrual 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, 2017: Real estate loans: One-to $ 841 $ 303 $ 783 $ 1,927 $ 142,791 $ 144,718 $ 139 Multi-family — — — — 78,288 78,288 — Commercial 89 286 — 375 120,852 121,227 — Home equity lines of credit 241 3 15 259 7,193 7,452 15 Construction — — — — 25,647 25,647 — Commercial — — — — 57,801 57,801 — Consumer 59 15 — 74 7,936 8,010 — Total $ 1,230 $ 607 $ 798 $ 2,635 $ 440,508 $ 443,143 $ 154 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-to $ 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 $3.1 million in troubled debt restructurings that were classified as impaired. The following tables present impaired loans: Three Months Ended March 31, 2017 Nine Months Ended March 31, 2017 Recorded Unpaid Specific Average Interest Interest on Average Interest Interest on March 31, 2017: Loans without a specific valuation allowance Real estate loans: One-to four-family $ 2,298 $ 2,298 $ — $ 2,316 $ 12 $ 11 $ 2,336 $ 27 $ 35 Multi-family 1,406 1,406 — 1,415 22 22 1,429 53 68 Commercial 20 20 — 21 — — 23 — — Home equity line of credit 9 9 — 9 — — 10 1 1 Construction — — — — — — — (1 ) — Commercial 93 93 — 97 — — 89 — — Consumer — — — — — — — — — Loans with a specific valuation allowance Real estate loans: One-to four-family — — — — — — — — — Multi-family — — — — — — — — — Commercial 7 7 7 7 — — 8 — — Home equity line of credit — — — — — — — — — Construction — — — — — — — — — Commercial — — — — — — — — — Consumer — — — — — — — — — Total: Real estate loans: One-to four-family 2,298 2,298 — 2,316 12 11 2,336 27 35 Multi-family 1,406 1,406 — 1,415 22 22 1,429 53 68 Commercial 27 27 7 28 — — 31 — — Home equity line of credit 9 9 — 9 — — 10 1 1 Construction — — — — — — — (1 ) — Commercial 93 93 — 97 — — 89 — — Consumer — — — — — — — — — $ 3,833 $ 3,833 $ 7 $ 3,865 $ 34 $ 33 $ 3,895 $ 80 $ 104 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-to $ 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-to 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-to 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 March 31, 2016 Nine Months Ended March 31, 2016 Recorded Balance Unpaid Principal Balance Specific Allowance Average Investment in Impaired Interest Income Recognized Interest on Cash Basis Average Investment in Impaired Interest Income Recognized Interest on Cash Basis March 31, 2016: Loans without a specific valuation allowance Real estate loans: One-to $ 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 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 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 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 March 31, 2017 and June 30, 2016: March 31, 2017 June 30, 2016 Mortgages on real estate: One-to $ 1,514 $ 1,604 Multi-family 155 185 Commercial 27 63 Home equity lines of credit — 316 Construction loans — — Commercial business loans 93 9 Consumer loans — — Total $ 1,789 $ 2,177 At March 31, 2017 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. As of March 31, 2017 all loans listed were on nonaccrual except for thirteen, one-to one-to March 31, 2017 June 30, 2016 Real estate loans One-to $ 1,787 $ 984 Multi-family 1,251 1,272 Commercial 7 9 Home equity lines of credit 9 11 Total real estate loans 3,054 2,276 Construction — — Commercial and industrial 93 9 Consumer loans — — Total $ 3,147 $ 2,285 TDR Modifications During the nine month period ended March 31, 2017, three one-to During the year ended June 30, 2016, the Company modified one home equity line of credit for $4,000. During the nine month period ended March 31, 2016, the Company modified one home equity line of credit for $5,000 and one consumer loan with a recorded investment of $2,000. TDR’s with Defaults The Company had one TDR, a one-to one-to 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 |