Loans | Note 5: Loans Major classifications of loans at the indicated dates are as follows: June 30, December 31, (In thousands) 2016 2015 Real estate loans: Secured by one-to-four family residences $ 180,230 $ 177,037 Secured by multi-family residences 5,211 5,146 Construction 3,698 1,251 Commercial real estate 4,698 3,522 Home equity lines of credit 15,492 14,523 Total real estate loans 209,329 201,479 Commercial and industrial loans 1,040 853 Other loans 74 61 Total loans 210,443 202,393 Net deferred loan origination costs 195 248 Less allowance for loan losses (900 ) (811 ) Loans receivable, net $ 209,738 $ 201,830 The Company originates residential mortgage, commercial, and consumer loans largely to customers throughout Monroe county and the surrounding western New York counties of Erie, Livingston, Ontario, Orleans, Jefferson and Wayne. Although the Company has a diversified loan portfolio, a substantial portion of its borrowers’ abilities to honor their loan contracts is dependent upon the counties’ employment and economic conditions. As of June 30, 2016 and December 31, 2015, residential mortgage loans with a carrying value of $172.3 million and $168.2 million, respectively, have been pledged by the Company to the Federal Home Loan Bank of New York (“FHLBNY”) under a blanket collateral agreement to secure the Company’s line of credit and term borrowings. The Company retains the servicing on most fixed-rate mortgage loans sold and receives a fee based on the principal balance outstanding. Loans serviced for others totaled $97.6 million and $85.9 million at June 30, 2016 and December 31, 2015, respectively. Loan servicing rights are recorded at fair value when loans are sold with servicing rights retained. The fair value of the mortgage servicing rights (“MSRs”) is determined using a method which utilizes servicing income, discount rates, and prepayment speeds relative to the Bank’s portfolio for MSRs and are amortized over the life of the loan. MSRs amounted to $646,000 and $561,000 at June 30, 2016 and December 31, 2015, respectively, and are included in other assets on the consolidated balance sheets. Loan Origination / Risk Management The Company’s lending policies and procedures are presented in Note 3 to the consolidated financial statements included in FSB Bancorp’s Registration Statement on Form S-1 declared effective by the Securities and Exchange Commission on May 13, 2016 and have not changed. To develop and document a systematic methodology for determining the allowance for loan losses, the Company has divided the loan portfolio into two portfolio segments, each with different risk characteristics but with similar methodologies for assessing risk. Each portfolio segment is broken down into loan classes where appropriate. Loan classes contain unique measurement attributes, risk characteristics, and methods for monitoring and assessing risk that are necessary to develop the allowance for loan losses. Unique characteristics such as borrower type, loan type, collateral type, and risk characteristics define each class. The following table illustrates the portfolio segments and classes for the Company’s loan portfolio: Portfolio Segment Class Real Estate Loans Secured by one-to-four family residences Secured by multi-family residences Construction Commercial real estate Home equity lines of credit Other Loans Commercial and industrial Other loans The following tables present the classes of the loan portfolio, not including net deferred loan fees, summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company's internal risk rating system as of the dates indicated: As of June 30, 2016 Special (In thousands) Pass Mention Substandard Doubtful Total Real estate loans: Secured by one-to-four family residences $ 178,699 $ - $ 1,531 $ - $ 180,230 Secured by multi-family residences 5,211 - - - 5,211 Construction 3,698 - - - 3,698 Commercial real estate 4,698 - - - 4,698 Home equity lines of credit 15,197 - 295 - 15,492 Total real estate loans 207,503 - 1,826 - 209,329 Commercial & industrial loans 1,040 - - - 1,040 Other loans 74 - - - 74 Total loans $ 208,617 $ - $ 1,826 $ - $ 210,443 As of December 31, 2015 Special (In thousands) Pass Mention Substandard Doubtful Total Real estate loans: Secured by one-to-four family residences $ 175,885 $ - $ 1,152 $ - $ 177,037 Secured by multi-family residences 5,146 - - - 5,146 Construction 1,251 - - - 1,251 Commercial real estate 3,522 - - - 3,522 Home equity lines of credit 14,223 - 300 - 14,523 Total real estate loans 200,027 - 1,452 - 201,479 Commercial & industrial loans 853 - - - 853 Other loans 60 - - 1 61 Total loans $ 200,940 $ - $ 1,452 $ 1 $ 202,393 Management has reviewed its loan portfolio and determined that, to the best of its knowledge, no exposure exists to sub-prime or other high-risk residential mortgages. The Company is not in the practice of originating these types of loans. Nonaccrual and Past Due Loans Loans are placed on nonaccrual when the contractual payment of principal and interest has become 90 days past due or management has serious doubts about further collectability of principal or interest, even though the loan may be currently performing. Loans are considered past due if the required principal and interest payments have not been received within thirty days of the payment due date. An age analysis of past due loans, segregated by portfolio segment and class of loans, as of June 30, 2016 and December 31, 2015, are detailed in the following tables: As of June 30, 2016 30-59 Days 60-89 Days Past Due Past Due 90 Days Total Total Loans (In thousands) And Accruing And Accruing and Over Past Due Current Receivable Real estate loans: Secured by one-to-four family residences $ 90 $ - $ 118 $ 208 $ 180,022 $ 180,230 Secured by multi-family residences - - - - 5,211 5,211 Construction - - - - 3,698 3,698 Commercial - - - - 4,698 4,698 Home equity lines of credit - - 18 18 15,474 15,492 Total real estate loans 90 - 136 226 209,103 209,329 Commercial & industrial loans - - - - 1,040 1,040 Other loans - - - - 74 74 Total loans $ 90 $ - $ 136 $ 226 $ 210,217 $ 210,443 As of December 31, 2015 30-59 Days 60-89 Days Past Due Past Due 90 Days Total Total Loans (In thousands) And Accruing And Accruing and Over Past Due Current Receivable Real estate loans: Secured by one-to-four family residences $ 118 $ - $ 63 $ 181 $ 176,856 $ 177,037 Secured by multi-family residences - - - - 5,146 5,146 Construction - - - - 1,251 1,251 Commercial - - - - 3,522 3,522 Home equity lines of credit - - 18 18 14,505 14,523 Total real estate loans 118 - 81 199 201,280 201,479 Commercial & industrial loans - - - - 853 853 Other loans 9 - 1 10 51 61 Total loans $ 127 $ - $ 82 $ 209 $ 202,184 $ 202,393 At June 30, 2016, the Company had one nonaccrual residential mortgage loan for $89,000, one nonaccrual home equity line of credit for $18,000, and one nonaccrual home equity loan for $29,000. At December 31, 2015, the Company had one nonaccrual residential mortgage loan for $63,000, one nonaccrual home equity line of credit for $18,000, and one nonaccrual checking line of credit for $1,000. There were no loans that were past due 90 days or more and still accruing interest at June 30, 2016 or December 31, 2015. At June 30, 2016 and December 31, 2015, there were no loans considered to be impaired and no troubled debt restructurings. |