Loans | (4) Loans The loan portfolio segments and classes are as follows (in thousands) At September 30, 2017 At December 31, Real estate loans: One-to-four-family $ 131,628 $ 155,262 Commercial and multi-family 367,008 356,788 Construction and land 64,849 51,520 Home equity 21,693 21,902 Total real estate loans 585,178 585,472 Commercial loans 119,225 100,239 Consumer loans 1,054 1,478 Total loans 705,457 687,189 Deduct: Deferred loan fees, net (353 ) (131 ) Allowance for loan losses (3,698 ) (3,274 ) Loans, net $ 701,406 $ 683,784 The Company has divided the loan portfolio into three portfolio segments, each with different risk characteristics and methodologies for assessing risk. All loans are underwritten in accordance with policies set forth and approved by the Company’s Board of Directors. The portfolio segments identified by the Company are as follows: Real Estate Loans. one-to-four-family One-to-four-family Commercial and multifamily real estate loans are secured by the subject property and are underwritten based on loan to value limits, cash flow coverage and general creditworthiness of the obligors. These loans are generally considered to have more credit risk than traditional one-to-four-family Construction and Land loans are to finance the construction of owner-occupied and lease properties. These loans are categorized as construction loans during the construction period, later converting to commercial or one-to- on-site pre-construction Home equity loans consists of either revolving line of credit, term, or second mortgage loans secured by one-to-four one-to-four Commercial Loans. Consumer Loans. An analysis of the change in the allowance for loan losses follows (in thousands) Real Estate Commercial Consumer Unallocated Total Three Months Ended September 30, 2017: Beginning balance $ 2,993 660 4 13 $ 3,670 (Credit) Provision for loan losses (169 ) 55 7 107 — Charge-offs — — — — — Recoveries 11 16 1 — 28 Ending balance $ 2,835 731 12 120 $ 3,698 Three Months Ended September 30, 2016: Beginning balance $ 2,240 606 35 14 $ 2,895 (Credit) Provision for loan losses (234 ) 190 (9 ) 53 — Charge-offs (73 ) (1 ) — — (74 ) Recoveries 8 17 — — 25 Ending balance $ 1,941 812 26 67 $ 2,846 Nine months Ended September 30, 2017: Beginning balance $ 2,473 469 6 326 $ 3,274 (Credit) Provision for loan losses (10 ) 202 14 (206 ) — Charge-offs — — (10 ) — (10 ) Recoveries 372 60 2 — 434 Ending balance $ 2,835 731 12 120 $ 3,698 Nine months Ended September 30, 2016: Beginning balance $ 1,354 583 23 551 $ 2,511 Provision (Credit) for loan losses 647 184 3 (484 ) 350 Charge-offs (95 ) (12 ) (3 ) — (110 ) Recoveries 35 57 3 — 95 Ending balance $ 1,941 812 26 67 $ 2,846 At September 30, 2017: Individually evaluated for impairment: Recorded investment $ 1,480 323 — — $ 1,803 Balance in allowance for loan losses $ 15 — — — $ 15 Collectively evaluated for impairment: Recorded investment $ 330,992 87,864 445 — $ 419,301 Balance in allowance for loan losses $ 2,285 671 12 120 $ 3,088 Recorded investment in acquired ASC 310-20 Loan Receivables $ 249,514 31,038 609 — $ 281,161 Balance in allowance for loan losses $ 535 60 — — $ 595 Recorded investment in acquired ASC 310-30 $ 3,192 — — — $ 3,192 Balance in allowance for loan losses $ — — — — $ — At December 31, 2016: Individually evaluated for impairment: Recorded investment $ 1,035 500 36 — $ 1,571 Balance in allowance for loan losses $ 21 9 1 — $ 31 Collectively evaluated for impairment: Recorded investment $ 274,513 59,586 608 — $ 334,707 Balance in allowance for loan losses $ 1,687 378 4 326 $ 2,395 Recorded investment in acquired ASC 310-20 Loan Receivables $ 307,605 40,153 834 — $ 348,592 Balance in allowance for loan losses $ 765 82 1 — $ 848 Recorded investment in acquired ASC 310-30 $ 2,319 — — — $ 2,319 Balance in allowance for loan losses $ — — — — $ — 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. The Company analyzes loans individually by classifying the loans as to credit risk. Loans classified as substandard or special mention are reviewed quarterly by the Company for further deterioration or improvement to determine if they are appropriately classified and whether there is any impairment. All loans are graded upon initial issuance. Further, commercial, multi-family and commercial real estate loans are generally reviewed periodically to determine the appropriate loan grading. In addition, during the renewal process of any loan, as well as if a loan becomes past due, the Company will determine the appropriate loan grade. Loans excluded from the review process above are generally classified as pass credits until: (a) they become past due; (b) management becomes aware of a deterioration in the credit worthiness of the borrower; or (c) the borrower contacts the Company for a modification. In these circumstances, the loan is specifically evaluated for potential classification as to special mention, substandard or even charged-off. Pass Special Mention Substandard Doubtful Loss The following summarizes the loan credit quality (in thousands) Real Estate Loans One-to Four-Family Commercial Construction Home Commercial Consumer Total Credit Risk Profile by Internally Assigned Grade: At September 30, 2017: Grade: Pass $ 129,643 $ 363,591 $ 64,337 $ 21,371 $ 118,178 $ 1,054 $ 698,174 Special mention 406 1,419 246 30 970 — 3,071 Substandard 1,579 1,998 266 292 77 — 4,212 Total $ 131,628 $ 367,008 $ 64,849 $ 21,693 $ 119,225 $ 1,054 $ 705,457 At December 31, 2016: Grade: Pass $ 153,965 $ 351,096 $ 49,901 $ 21,902 $ 98,714 $ 1,442 $ 677,020 Special mention 490 730 543 — 79 — 1,842 Substandard 807 4,962 1,076 — 1,446 36 8,327 Total $ 155,262 $ 356,788 $ 51,520 $ 21,902 $ 100,239 $ 1,478 $ 687,189 Age analysis of past-due (in thousands) Accruing Loans 30-59 60-89 90 Days Or Total Current Nonaccrual Total At September 30, 2017: Real estate mortgage loans: One-to-four $ 172 $ 16 $ — $ 188 $ 130,656 $ 784 $ 131,628 Commercial and Multifamily 756 — — 756 366,112 140 367,008 Construction and Land 12 496 — 508 64,161 180 64,849 Home Equity — — — — 21,690 3 21,693 Commercial loans 2,145 21 — 2,166 117,059 — 119,225 Consumer loans 61 — — 61 993 — 1,054 Total $ 3,146 $ 533 $ — $ 3,679 $ 700,671 $ 1,107 $ 705,457 At December 31, 2016: Real estate mortgage loans: One-to-four $ 501 $ 274 $ — $ 775 $ 154,487 $ — $ 155,262 Commercial and Multifamily 778 — — 778 355,755 255 356,788 Construction and Land 1,519 — — 1,519 50,001 — 51,520 Home Equity 22 — — 22 21,880 — 21,902 Commercial loans 217 — — 217 100,022 — 100,239 Consumer loans 10 — — 10 1,432 36 1,478 Total $ 3,047 $ 274 $ — $ 3,321 $ 683,577 $ 291 $ 687,189 The following summarizes the amount of impaired loans (in thousands) With No Related With an Allowance Recorded Total Recorded Unpaid Recorded Unpaid Related Recorded Unpaid Related September 30, 2017 Real estate mortgage loans: One-to- $ 784 $ 784 $ 309 $ 309 $ 15 $ 1,093 $ 1,093 $ 15 Commercial and Multifamily 204 626 — — — 204 626 — Construction and Land 180 180 — — — 180 180 — Home Equity 3 3 — — — 3 3 — Commercial loans 323 358 — — — 323 358 — $ 527 $ 984 $ 309 $ 309 $ 15 $ 1,803 $ 2,260 $ 15 December 31, 2016: Real estate mortgage loans: One-to- $ — $ — $ 448 $ 448 $ 21 $ 448 $ 448 $ 21 Commercial and Multifamily 587 1,568 — — — 587 1,568 — Commercial loans 427 457 73 77 9 500 534 9 Consumer Loans — — 36 36 1 36 36 1 $ 1,014 $ 2,025 $ 557 $ 561 $ 31 $ 1,571 $ 2,586 $ 31 The average net investment in impaired loans and interest income recognized and received on impaired loans are as follows (in thousands) Three Months Ended September 30, 2017 2016 Average Interest Interest Average Interest Interest Real estate mortgage loans: One-to-four-family $ 309 $ 4 $ 5 $ 453 $ 6 $ 6 Commercial and Multifamily 209 9 10 902 8 19 Construction and Land — — — 73 — 6 Commercial loans 327 6 8 518 9 10 Total $ 845 $ 19 $ 23 $ 1,946 $ 23 $ 41 Nine months Ended September 30, 2017 2016 Average Interest Interest Average Interest Interest Real estate mortgage loans: One-to-four-family $ 312 $ 14 $ 13 $ 455 $ 20 $ 18 Commercial and Multifamily 229 28 27 918 36 66 Construction and Land — — — 167 — 8 Commercial loans 390 21 23 525 27 28 Total $ 931 $ 63 $ 63 $ 2,065 $ 83 $ 120 During the nine months ended September 30, 2017 and 2016, the Company did not enter into any debt restructurings and the Company had no loans restructured as troubled debt restructurings (“TDRs”) that subsequently defaulted that had been modified in the previous twelve month period. As of September 30, 2017 the Company had remaining approximately $405,000 in accruing TDRs and $71,000 of non-accruing At September 30, 2017 the contractually required principal of Purchased Credit Impaired (“PCI”) loans acquired was $3.2 million. The recorded investment of PCI loans was $2.8 million. There were no additional losses generated during the nine months ended September 30, 2017 from these loans. |