LOANS | NOTE 6 - LOANS Loans consisted of the following: September 30, December 31, 2018 2017 (In Thousands) Real estate loans: One-to four- family residential $ 137,685 $ 143,413 Commercial 24,042 24,360 Multi-family 27,334 21,402 Home equity loans and lines of credit 3,346 2,553 Construction 27,813 25,279 Commercial and industrial loans 2,761 2,802 Consumer loans: Consumer lines of credit 19 12 Other consumer loans 586 994 223,586 220,815 Net deferred loan origination fees, costs, premiums and discounts 348 389 Allowance for loan losses (1,319 ) (1,229 ) Net loans $ 222,615 $ 219,975 The following tables set forth information regarding the allowance for loan losses as of and for the three and nine months ended September 30, 2018 and 2017: Real Estate: Consumer One- to four-family Home Equity Loans Commercial and Consumer Other Residential Commercial Multi-family and Lines of Credit Construction Industrial Loans Lines of Credit Consumer Unallocated Total (In Thousands) Three Months ended September 30, 2018: Allowance for loan losses: Beginning balance $ 581 $ 120 $ 87 $ 17 $ 392 $ 9 $ - $ 6 $ 62 $ 1,274 Charge-offs - - - - - - - - - - Recoveries - - - - - - - - - - (Benefit) provision (25 ) 15 36 (1 ) 6 - (1 ) 15 45 Ending balance $ 556 $ 135 $ 123 $ 16 $ 398 $ 9 $ - $ 5 $ 77 $ 1,319 Three Months ended September 30, 2017: Allowance for loan losses: Beginning balance $ 524 $ 131 $ 85 $ 11 $ 349 $ 9 $ 1 $ 10 $ 19 $ 1,139 Charge-offs - - - - - - - - - - Recoveries - - - - - - - - - - Provision (benefit) 44 (6 ) 1 2 10 - - (2 ) (4 ) 45 Ending balance $ 568 $ 125 $ 86 $ 13 $ 359 $ 9 $ 1 $ 8 $ 15 $ 1,184 Real Estate: Consumer One- to four-family Home Equity Loans Commercial and Consumer Other Residential Commercial Multi-family and Lines of Credit Construction Industrial Loans Lines of Credit Consumer Unallocated Total (In Thousands) Nine Months ended September 30, 2018: Allowance for loan losses: Beginning balance $ 612 $ 124 $ 86 $ 12 $ 348 $ 9 $ - $ 8 $ 30 $ 1,229 Charge-offs - - - - - - - - - - Recoveries - - - - - - - - - - (Benefit) provision (56 ) 11 37 4 50 - - (3 ) 47 90 Ending balance $ 556 $ 135 $ 123 $ 16 $ 398 $ 9 $ - $ 5 $ 77 $ 1,319 Nine Months ended September 30, 2017: Allowance for loan losses: Beginning balance $ 449 $ 134 $ 74 $ 12 $ 340 $ 10 $ 1 $ 15 $ 14 $ 1,049 Charge-offs - - - - - - - - - - Recoveries - - - - - - - - - - Provision (benefit) 119 (9 ) 12 1 19 (1 ) - (7 ) 1 135 Ending balance $ 568 $ 125 $ 86 $ 13 $ 359 $ 9 $ 1 $ 8 $ 15 $ 1,184 The following tables set forth information regarding the allowance for loan losses at September 30, 2018 and December 31, 2017: Real Estate: Consumer One- to four-family Home Equity Loans Commercial and Consumer Other Residential Commercial Multi-family and Lines of Credit Construction Industrial Loans Lines of Credit Consumer Unallocated Total At September 30, 2018 Allowance for loan losses: Ending balance: Individually evaluated for impairment $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Ending balance: Collectively evaluated for impairment 556 135 123 16 398 9 - 5 77 1,319 Total allowance for loan losses ending balance $ 556 $ 135 $ 123 $ 16 $ 398 $ 9 $ - $ 5 $ 77 $ 1,319 Loans: Ending balance: Individually evaluated for impairment $ 4,830 $ 602 $ - $ 5 $ - $ - $ - $ - $ - $ 5,437 Ending balance: Collectively evaluated for impairment 132,855 23,440 27,334 3,341 27,813 2,761 19 586 - 218,149 Total loans ending balance $ 137,685 $ 24,042 $ 27,334 $ 3,346 $ 27,813 $ 2,761 $ 19 $ 586 $ - $ 223,586 Real Estate: Consumer One- to four-family Home Equity Loans Commercial and Consumer Other Residential Commercial Multi-family and Lines of Credit Construction Industrial Loans Lines of Credit Consumer Unallocated Total At December 31, 2017: Allowance for loan losses: Ending balance: Individually evaluated for impairment $ 21 $ - $ - $ - $ - $ - $ - $ - $ - $ 21 Ending balance: Collectively evaluated for impairment 591 124 86 12 348 9 - 8 30 1,208 Total allowance for loan losses ending balance $ 612 $ 124 $ 86 $ 12 $ 348 $ 9 $ - $ 8 $ 30 $ 1,229 Loans: Ending balance: Individually evaluated for impairment $ 2,882 $ 622 $ - $ 6 $ - $ - $ - $ - $ - $ 3,510 Ending balance: Collectively evaluated for impairment 140,531 23,738 21,402 2,547 25,279 2,802 12 994 - 217,305 Total loans ending balance $ 143,413 $ 24,360 $ 21,402 $ 2,553 $ 25,279 $ 2,802 $ 12 $ 994 $ - $ 220,815 The following tables set forth information regarding nonaccrual loans and past-due loans as of September 30, 2018 and December 31, 2017: 90 Days 90 Days or More 30-59 Days 60-89 Days or More Total Total Past Due Nonaccrual Past Due Past Due Past Due Past Due Current Total and Accruing Loans (In Thousands) September 30, 2018: Real estate loans: One- to four-family residential $ - $ - $ 567 $ 567 $ 137,118 $ 137,685 $ - $ 567 Commercial - - - - 24,042 24,042 - - Multi-family - - - - 27,334 27,334 - - Home equity loans and lines of credit - - 5 5 3,341 3,346 - 5 Construction - - - - 27,813 27,813 - - Commercial and industrial loans - - - - 2,761 2,761 - - Consumer loans: Consumer lines of credit - - - - 19 19 - - Other consumer - - - - 586 586 - - Total $ - $ - $ 572 $ 572 $ 223,014 $ 223,586 $ - $ 572 December 31, 2017: Real estate loans: One- to four-family residential $ - $ - $ 112 $ 112 $ 143,301 $ 143,413 $ - $ 112 Commercial - - - - 24,360 24,360 - - Multi-family - - - - 21,402 21,402 - - Home equity loans and lines of credit - - - - 2,553 2,553 - - Construction - - - - 25,279 25,279 - - Commercial and industrial loans - - - - 2,802 2,802 - - Consumer loans: Consumer lines of credit - - - - 12 12 - - Other consumer 12 - - 12 982 994 - - Total $ 12 $ - $ 112 $ 124 $ 220,691 $ 220,815 $ - $ 112 Information about loans that meet the definition of an impaired loan in ASC 310-10-35, “Receivables – Overall Subsequent Measurement,” is as follows at September 30, 2018 and December 31, 2017: Unpaid Recorded Principal Related Investment Balance Allowance (In Thousands) September 30, 2018: With no related allowance recorded: Real estate loans: One- to four-family residential $ 4,830 $ 4,830 $ - Commercial 602 602 - Home equity loans and lines of credit 5 87 - Total impaired with no related allowance 5,437 5,519 - With an allowance recorded: Real estate loans: One- to four-family residential - - - Commercial - - - Home equity loans and lines of credit - - - Total impaired with an allowance recorded - - - Total Real estate loans: One- to four-family residential 4,830 4,830 - Commercial 602 602 - Home equity loans and lines of credit 5 87 - Total impaired loans $ 5,437 $ 5,519 $ - December 31, 2017: With no related allowance recorded: Real estate loans: One- to four-family residential $ 2,315 $ 2,315 $ - Commercial 622 622 - Home equity loans and lines of credit 6 88 - Total impaired with no related allowance 2,943 3,025 - With an allowance recorded: Real estate loans: One- to four-family residential 567 567 21 Commercial - - - Home equity loans and lines of credit - - - Total impaired with an allowance recorded 567 567 21 Total Real estate loans: One- to four-family residential 2,882 2,882 21 Commercial 622 622 - Home equity loans and lines of credit 6 88 - Total impaired loans $ 3,510 $ 3,592 $ 21 The following table presents, by class, information related to average recorded investment and interest income recognized on impaired loans for the nine months ended September 30, 2018 and September 30, 2017. Nine Months Ended Nine Months Ended September 30, 2018 September 30, 2017 Average Interest Average Interest Recorded Income Recorded Income Investment Recognized Investment Recognized (In Thousands) With no related allowance recorded: Real estate loans: One- to four-family residential $ 3,076 $ 76 $ 2,757 $ 87 Commercial 611 35 642 27 Home equity loans and lines of credit 5 - 6 2 Total impaired with no related allowance 3,692 111 3,405 116 With an allowance recorded: Real estate loans: One- to four-family residential - - 643 41 Commercial - - - - Home equity loans and lines of credit - - - - Total impaired with an allowance recorded - - 643 41 Total Real estate loans: One- to four-family residential 3,076 76 3,400 128 Commercial 611 35 642 27 Home equity loans and lines of credit 5 - 6 2 Total impaired loans $ 3,692 $ 111 $ 4,048 $ 157 The following tables present the Company’s loans by risk rating: Real Estate: Consumer One- to four-family Home Equity Loans Commercial and Consumer Residential Commercial Multi-family and Lines of Credit Construction Industrial Loans Lines of Credit Other Consumer Total (In Thousands) September 30, 2018: Grade: Pass $ - $ 18,504 $ 27,334 $ - $ 27,813 $ 2,761 $ - $ - $ 76,412 Special mention 2,000 5,538 - - - - - 7,538 Substandard 567 - - 5 - - - - 572 Loans not formally rated 135,118 - 3,341 - - 19 586 139,064 Total $ 137,685 $ 24,042 $ 27,334 $ 3,346 $ 27,813 $ 2,761 $ 19 $ 586 $ 223,586 December 31, 2017: Grade: Pass $ - $ 22,818 $ 21,402 $ - $ 23,649 $ 2,802 $ - $ - $ 70,671 Special mention - 1,542 - - 1,630 - - - 3,172 Substandard 679 - - 6 - - - - 685 Loans not formally rated 142,734 - - 2,547 - - 12 994 146,287 Total $ 143,413 $ 24,360 $ 21,402 $ 2,553 $ 25,279 $ 2,802 $ 12 $ 994 $ 220,815 At September 30, 2018 and December 31, 2017, there were no loans rated “doubtful” or “loss.” Credit Quality Information The Company utilizes an eight grade internal loan rating system for commercial and multi-family real estate, construction and commercial loans as follows: Loans rated 1 – 3W: Loans in these categories are considered “pass” rated loans with low to average risk. Loans rated 4: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management. Loans rated 5: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Company will sustain some loss if the weakness is not corrected. Loans rated 6: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, highly questionable and improbable. Loans rated 7: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted. On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial and multi-family real estate, construction and commercial loans. For residential real estate, home equity loans and lines of credit and consumer loans, the Company initially assesses credit quality based upon the borrower’s ability to pay and subsequently monitors these loans based on the borrower’s payment activity. The Company classifies loans modified as TDRs as impaired loans with an allowance established as part of the allocated component of the allowance for loan losses when the discounted cash flows or value of the underlying collateral of the impaired loan is lower than its carrying value. During the nine months ended September 30, 2018, there were two loans modified as TDRs. During the nine months ended September 30, 2017, there were two loans (one relationship) modified as TDRs. Pre-Modification Post-Modification Number of Outstanding Recorded Outstanding Recorded Contracts Investment Investment (Dollars In Thousands) September 30, 2018 Troubled Debt Restructurings: Real estate loans: One- to four- family residential 2 $ 1,788 $ 2,150 2 $ 1,788 $ 2,150 September 30, 2017: Troubled Debt Restructurings: Real estate loans: One- to four- family residential 1 $ 567 $ 567 Home equity loans and lines of credit 1 6 6 2 $ 573 $ 573 Term Extensions and Rate Interest Only Rate Reduction and Capitalization of Reduction Period Interest Only Period Payments and Fees (Dollars in Thousands) September 30, 2018 Real estate loans: One- to four- family residential $ - $ 150 $ - $ 2,000 Total $ - $ 150 $ - $ 2,000 December 31, 2017: Real estate loans: One- to four- family residential $ - $ 567 $ - $ - Home equity loans and lines of credit - 6 - - Total $ - $ 573 $ - $ - As of September 30, 2018 there were two consumer mortgage loans (one relationship) collateralized by residential real estate in the process of foreclosure. These loans, which were modified as troubled debt restructures within the past twelve months, amount to $654,000 on a gross basis and previously had a partial charge off of $82,000 resulting in a combined net loan balance of $572,000. As of September 30, 2018, there was no commitment to lend additional funds to this borrower. As of December 31, 2017, there were no consumer mortgage loans collateralized by residential real estate in the process of foreclosure. As of September 30, 2018 and December 31, 2017, there were no commitments to lend additional funds to borrowers whose loans were modified in troubled debt restructurings. Loans serviced for others are not included in the accompanying consolidated balance sheets. The unpaid balances of mortgage and other loans serviced for others were $23.0 million and $22.7 million at September 30, 2018 and December 31, 2017, respectively. |