Loans | 3 . LOANS A summary of the loan portfolio is as follows: December 31, 2018 2017 (In thousands) Mortgage loans on real estate: Residential: One-to-four family $ 246,756 $ 198,475 Home equity loans and lines of credit 43,545 38,968 Commercial 113,642 98,755 Construction 42,139 25,357 446,082 361,555 Commercial and industrial 21,285 24,766 Consumer 19,407 16,337 Total loans 486,774 402,658 Allowance for loan losses (4,437 ) (3,737 ) Net deferred loan costs and fees, and purchase premiums 1,509 1,452 $ 483,846 $ 400,373 The Company has transferred a portion of its originated commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying consolidated balance sheets. The Company and participating lenders share ratably in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments (net of servicing fees) to participating lenders and disburses required escrow funds to relevant parties. At December 31, 2018 and 2017, the Company was servicing loans for participants aggregating $5,596,000 and $5,902,000, respectively. See Note 4 for information relating to the Company’s servicing of residential mortgage loans for others. The following table presents activity in the allowance for loan losses, by loan category, for the years ended December 31, 2018 and 2017 and allocation of the allowance to each category as of such dates: Second Residential Mortgages Commercial Commercial 1-4 Family and HELOC Real Estate Construction and Industrial Consumer Total (In thousands) Allowance for loan losses Balance at December 31, 2016 $ 1,018 $ 436 $ 1,410 $ 225 $ 37 $ 145 $ 3,271 Provision (credit) for loan losses (187 ) (77 ) 210 126 263 205 540 Loans charged-off — — — — — (153 ) (153 ) Recoveries 23 — — — 35 21 79 Balance at December 31, 2017 854 359 1,620 351 335 218 3,737 Provision (credit) for loan losses 197 (67 ) 30 414 (70 ) 258 762 Loans charged-off — — (2 ) — — (119 ) (121 ) Recoveries 41 — — — — 18 59 Balance at December 31, 2018 $ 1,092 $ 292 $ 1,648 $ 765 $ 265 $ 375 $ 4,437 Second Residential Mortgages Commercial Commercial 1-4 Family and HELOC Real Estate Construction and Industrial Consumer Total December 31, 2018 Allowance for impaired loans $ 108 $ — $ — $ — $ — $ 174 $ 282 Allowance for non-impaired loans 984 292 1,648 765 265 201 4,155 Total allowance for loan losses $ 1,092 $ 292 $ 1,648 $ 765 $ 265 $ 375 $ 4,437 Impaired loans $ 6,291 $ 408 $ 52 $ — $ — $ 199 $ 6,950 Non-impaired loans 240,465 43,137 113,590 42,139 21,285 19,208 479,824 Total loans $ 246,756 $ 43,545 $ 113,642 $ 42,139 $ 21,285 $ 19,407 $ 486,774 December 31, 2017 Allowance for impaired loans $ 160 $ 1 $ 1 $ — $ — $ — $ 162 Allowance for non-impaired loans 694 358 1,619 351 335 218 3,575 Total allowance for loan losses $ 854 $ 359 $ 1,620 $ 351 $ 335 $ 218 $ 3,737 Impaired loans $ 5,205 $ 276 $ 352 $ — $ — $ — $ 5,833 Non-impaired loans 193,270 38,692 98,403 25,357 24,766 16,337 396,825 Total loans $ 198,475 $ 38,968 $ 98,755 $ 25,357 $ 24,766 $ 16,337 $ 402,658 The following table presents past due and non-accrual loans, by loan category, at December 31, 2018 and 2017: 30 - 59 Days Past Due 60 - 89 Days Past Due 90 Days or More Past Due Total Past Due Non-accrual Loans (In thousands) December 31, 2018 Residential one-to-four family $ 655 $ 207 $ 635 $ 1,497 $ 2,474 Home equity loans and lines of credit 520 — — 520 407 Commercial real estate — — — — — Construction — — — — — Commercial and industrial — — — — — Consumer 25 4 — 29 149 Total $ 1,200 $ 211 $ 635 $ 2,046 $ 3,030 December 31, 2017 Residential one-to-four family $ 737 $ — $ — $ 737 $ 1,975 Home equity loans and lines of credit 96 — — 96 276 Commercial real estate — — — — — Construction — — — — — Commercial and industrial — — — — — Consumer — — — — — Total $ 833 $ — $ — $ 833 $ 2,251 Further information pertaining to impaired loans, which includes both non-accrual loans and troubled debt restructurings, follows: Recorded Investment Unpaid Principal Balance Related Allowance (In thousands) December 31, 2018 Impaired loans without a valuation allowance: Residential one-to-four family $ 4,280 $ 4,280 $ — Home equity loans and lines of credit 408 408 — Commercial real estate 52 52 — Total 4,740 4,740 — Impaired loans with a valuation allowance: Residential one-to-four family 2,011 2,011 108 Consumer 199 199 174 Total 2,210 2,210 282 Total impaired loans $ 6,950 $ 6,950 $ 282 December 31, 2017 Impaired loans without a valuation allowance: Residential one-to-four family $ 2,641 $ 2,641 $ — Home equity loans and lines of credit 247 247 — Commercial real estate 257 257 — Total 3,145 3,145 — Impaired loans with a valuation allowance: Residential one-to-four family 2,564 2,564 160 Home equity loans and lines of credit 29 29 1 Commercial real estate 95 95 1 Total 2,688 2,688 162 Total impaired loans $ 5,833 $ 5,833 $ 162 Information related to the average balances of impaired loans and the interest income recognized on such loans, follows: Average Interest Cash Basis Recorded Income Interest Investment Recognized Recognized (In thousands) Year Ended December 31, 2018 Residential one-to-four family $ 6,781 $ 210 $ 84 Home equity loans and lines of credit 420 36 36 Commercial real estate 244 15 — Consumer 50 2 — Total $ 7,495 $ 263 $ 120 Year Ended December 31, 2017 Residential one-to-four family $ 4,956 $ 195 $ 82 Home equity loans and lines of credit 276 1 1 Commercial real estate 655 36 — Total $ 5,887 $ 232 $ 83 No additional funds are committed to be advanced in connection with impaired loans. Troubled Debt Restructurings The Company periodically grants concessions to borrowers experiencing financial difficulties. The Company’s troubled debt restructurings consist primarily of interest rate concessions for periods of three months to thirty years for residential real estate loans, and for periods up to one year for commercial real estate loans. At December 31, 2018, the Company had seventeen residential real estate loans and one commercial real estate loan aggregating $3,341,000 and $52,000, respectively, which were subject to troubled debt restructuring agreements. At December 31, 2017, the Company had nineteen residential real estate loans and two commercial real estate loans aggregating $4,315,000 and $153,000, respectively, which were subject to troubled debt restructuring agreements. As of December 31, 2018 and 2017, $3,341,000 and $4,315,000, respectively, in troubled debt restructurings were performing in accordance with the terms of the modified loan agreements. Included in such amounts are $366,000 and $1,085,000, respectively, that are being accounted for as non-accrual loans. For the year ended December 31, 2018 the Company entered into one loan modification meeting the criteria of a troubled debt restructuring in which a loan term concession was granted to a borrower. For the year ended December 31, 2017. the Company did not enter into any loan modifications meeting the criteria of a troubled debt restructuring. Management performs a discounted cash flow calculation to determine the amount of impairment reserve required on each of the troubled debt restructurings. Any reserve required is recorded as part of the allowance for loan losses. At December 31, 2018 and 2017 allowances of $282,000 and $162,000, respectively, related to troubled debt restructurings. During the years ended December 31, 2018 and 2017, there were no troubled debt restructurings that defaulted (over 30 days past due) within twelve months of the restructure date. Credit Quality Information The Company utilizes an eight-grade internal loan rating system for commercial real estate, construction and commercial loans, as follows: Loans rated 1 – 3A are considered “pass” rated loans with low to average risk. Loans rated 4 are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management. Loans rated 5 are considered “substandard” and are 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 are considered “doubtful” and have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable. Loans rated 7 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 real estate, construction and commercial loans. Annually, the Company engages an independent third party to review a significant portion of loans within these segments. Management uses the results of these reviews as part of its annual review process. The following table presents the Company’s loans by risk rating at December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Commercial Real Construction Commercial and Industrial Commercial Real Construction Commercial and Industrial (In thousands) Loans rated 1 - 3A $ 113,642 $ 42,139 $ 21,285 $ 98,556 $ 25,357 $ 24,766 Loans rated 4 — — — — — — Loans rated 5 — — — 199 — — $ 113,642 $ 42,139 $ 21,285 $ 98,755 $ 25,357 $ 24,766 Residential mortgages, home equity loans and lines of credit, and consumer loans are monitored for credit quality based primarily on their payment status. When one of these loans becomes more than 90 days delinquent it is assigned an internal loan rating. At December 31, 2018, one consumer loan for $149,000 was rated as doubtful, $2,469,000 in residential mortgages and one consumer loan for $50,000 were rated as substandard and $936,000 in residential mortgages and $407,000 in home equity lines of credit were rated as special mention. At December 31, 2017, $712,000 in residential mortgages were rated as substandard and $2,512,000 in residential mortgages and $247,000 in home equity lines of credit were rated as special mention . |