Loans and Allowance for Loan Losses | Note 3: Loans and Allowance for Loan Losses The composition of the loan portfolio at September 30, 2018 and December 31, 2017 was as follows: September 30, December 31, 2018 2017 Residential mortgage loans $ 64,690 $ 53,682 Commercial real estate and land loans 16,027 13,739 Home equity and other consumer 13,259 12,570 Residential construction loans 10,060 10,362 Residential mortgage loans, non-owner occupied 6,304 7,082 Multi-family real estate loans 1,203 2,084 Commercial loans 5,851 5,536 117,394 105,055 Net deferred loan costs 31 66 Loans in process (5,457 ) (7,411 ) Allowance for loan losses (1,189 ) (1,181 ) Net loans $ 110,779 $ 96,529 Loans serviced for the benefit of others at September 30, 2018 and December 31, 2017 amounted to $1,871 and $2,166, respectively. Loans in process relates to primarily residential mortgage loans. Risk characteristics applicable to each segment of the loan portfolio are described as follows. Residential Mortgage Loans, including Construction Loans and Land Loans Residential Mortgage Loans, Non-Owner Occupied Commercial Real Estate and Multi-Family Real Estate Commercial Home equity and Other Consumer The following tables present the activity in the allowance for loan losses and the recorded investment in loans based on portfolio segment and impairment method for the three and nine months ended September 30, 2018 and 2017 and year ended December 31, 2017: Nine Months Ended September 30, Residential Commercial Home Residential Residential Multi- Commercial Total Allowance for loan losses: Balance, beginning of year $ 283 $ 199 $ 276 $ 116 $ 122 $ 25 $ 160 $ 1,181 Provision charged to expense 148 118 30 (6 ) (44 ) (11 ) (136 ) 99 Losses charged off (35 ) (68 ) - - - - - (103 ) Recoveries 11 - - - 1 - - 12 Balance, end of period $ 407 $ 249 $ 306 $ 110 $ 79 $ 14 $ 24 $ 1,189 Ending balance: individually evaluated for impairment $ 4 $ - $ - $ - $ - $ - $ - $ 4 Ending balance: collectively evaluated for impairment $ 403 $ 249 $ 306 $ 110 $ 79 $ 14 $ 24 $ 1,185 Loans: Ending balance $ 64,690 $ 16,027 $ 13,259 $ 10,060 $ 6,304 $ 1,203 $ 5,851 $ 117,394 Ending balance: individually evaluated for impairment $ 75 $ - $ 11 $ - $ 191 $ - $ - $ 277 Ending balance: collectively evaluated for impairment $ 64,615 $ 16,027 $ 13,248 $ 10,060 $ 6,113 $ 1,203 $ 5,851 $ 117,117 Three Months Ended September Residential Commercial Home Residential Residential Multi- Commercial Total Allowance for loan losses: Balance, beginning of period $ 422 $ 205 $ 304 $ 117 $ 85 $ 14 $ 20 $ 1,167 Provision charged to expense (6 ) 112 2 (7 ) (6 ) - 4 99 Losses charged off (13 ) (68 ) - - - - - (81 ) Recoveries 4 - - - - - - 4 Balance, end of period $ 407 $ 249 $ 306 $ 110 $ 79 $ 14 $ 24 $ 1,189 Nine Months Ended September 30, Residential Commercial Home Residential Residential Multi- Commercial Total Allowance for loan losses: Balance, beginning of year $ 166 $ 164 $ 341 $ 88 $ 175 $ 30 $ 173 $ 1,137 Provision charged to expense 46 108 (54 ) (3 ) 28 (2 ) (21 ) 102 Losses charged off (10 ) (73 ) - - - - - (83 ) Recoveries 1 - - - - - 10 11 Balance, end of period $ 203 $ 199 $ 287 $ 85 $ 203 $ 28 $ 162 $ 1,167 Three Months Ended September 30, Residential Commercial Home Residential Residential Multi- Commercial Total Allowance for loan losses: Balance, beginning of period $ 197 $ 229 $ 316 $ 91 $ 220 $ 23 $ 153 $ 1,229 Provision charged to expense 15 43 (29 ) (6 ) (17 ) 5 6 17 Losses charged off (10 ) (73 ) - - - - - (83 ) Recoveries 1 - - - - - 3 4 Balance, end of period $ 203 $ 199 $ 287 $ 85 $ 203 $ 28 $ 162 $ 1,167 Year Ended December 31, 2017 Residential Commercial Home Residential Residential Multi- Commercial Total Allowance for loan losses: Balance, beginning of year $ 166 $ 164 $ 341 $ 88 $ 175 $ 30 $ 173 $ 1,137 Provision charged to expense 112 108 (65 ) 28 (44 ) (5 ) (32 ) 102 Losses charged off - (73 ) - - (9 ) - - (82 ) Recoveries 5 - - - - - 19 24 Balance, end of year $ 283 $ 199 $ 276 $ 116 $ 122 $ 25 $ 160 $ 1,181 Ending balance: individually evaluated for impairment $ 22 $ 10 $ - $ - $ 32 $ - $ 138 $ 202 Ending balance: collectively evaluated for impairment $ 261 $ 189 $ 276 $ 116 $ 90 $ 25 $ 22 $ 979 Loans: Ending balance $ 53,682 $ 13,739 $ 12,570 $ 10,362 $ 7,082 $ 2,084 $ 5,536 $ 105,055 Ending balance: individually evaluated for impairment $ 142 $ 157 $ - $ - $ 196 $ - $ 300 $ 795 Ending balance: collectively evaluated for impairment $ 53,540 $ 13,582 $ 12,570 $ 10,362 $ 6,886 $ 2,084 $ 5,236 $ 104,260 Internal Risk Categories Loan grades are numbered 1 through 8. Grades 5 through 8 are considered satisfactory grades. The grade of 1, or Special Mention, represents loans of lower quality and is considered criticized. The grades of 2, or Substandard, 3, or Doubtful, and 4, or Loss refer to assets that are classified. The use and application of these grades by the Bank will be uniform and shall conform to the Bank’s policy. Special Mention (grade 1) Substandard (grade 2) Doubtful (grade 3) Loss (grade 4) Satisfactory (grades 5 through 8) The following tables present the credit risk profile of the Bank’s loan portfolio based on rating category and payment activity as of September 30, 2018 and December 31, 2017: September 30, 2018 (Unaudited) Residential Commercial Home Residential Residential Multi-Family Commercial Total Rating Satisfactory (5-8) $ 63,478 $ 15,668 $ 13,006 $ 10,060 $ 6,275 $ 1,203 $ 5,580 $ 115,270 Special mention (1) - - - - - - 125 125 Substandard (2) 1,212 359 253 - 29 - 146 1,999 Doubtful (3) - - - - - - - - Loss (4) - - - - - - - - Total $ 64,690 $ 16,027 $ 13,259 $ 10,060 $ 6,304 $ 1,203 $ 5,851 $ 117,394 December 31, 2017 Residential Commercial Home Residential Residential Multi-Family Commercial Total Rating Satisfactory (5-8) $ 52,948 $ 13,212 $ 12,411 $ 10,362 $ 6,508 $ 2,084 $ 5,039 $ 102,564 Special mention (1) - - - - - - - - Substandard (2) 734 527 159 - 574 - 497 2,491 Doubtful (3) - - - - - - - - Loss (4) - - - - - - - - Total $ 53,682 $ 13,739 $ 12,570 $ 10,362 $ 7,082 $ 2,084 $ 5,536 $ 105,055 The Company evaluates the loan risk grading system definitions and allowance for loan losses methodology on an ongoing basis. No significant changes were made to either during the three and nine months ended September 30, 2018. The following tables present the Bank’s loan portfolio aging analysis of the recorded investment in loans as of September 30, 2018 and December 31, 2017: September 30, 2018 (Unaudited) 30-59 Days 60-89 Days 90 Days Total Current Total Recorded Residential mortgage loans $ 497 $ - $ 558 $ 1,055 $ 63,635 $ 64,690 $ - Commercial real estate and land loans - - - - 16,027 16,027 - Home equity and other consumer - - 39 39 13,220 13,259 - Residential construction loans - - - - 10,060 10,060 - Residential mortgage loans, non-owner occupied - - - - 6,304 6,304 - Multi-family real estate loans - - - - 1,203 1,203 - Commercial loans - - - - 5,851 5,851 - Total $ 497 $ - $ 597 $ 1,094 $ 116,300 $ 117,394 $ - December 31, 2017 30-59 Days 60-89 Days 90 Days Total Current Total Recorded Residential mortgage loans $ 173 $ - $ 634 $ 807 $ 52,875 $ 53,682 $ - Commercial real estate and land loans - - 157 157 13,582 13,739 - Home equity and other consumer 39 - - 39 12,531 12,570 - Residential construction loans - - - - 10,362 10,362 - Residential mortgage loans, non-owner occupied - - - - 7,082 7,082 - Multi-family real estate loans - - - - 2,084 2,084 - Commercial loans - - - - 5,536 5,536 - Total $ 212 $ - $ 791 $ 1,003 $ 104,052 $ 105,055 $ - A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Bank will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. The following tables present impaired loans at September 30, 2018, September 30, 2017 and as of December 31, 2017: For the Three Months For the Nine Months As of September 30, 2018 September 30, 2018 September 30, 2018 Average Average Unpaid Investment Interest Investment Interest Recorded Principal Allocated in Impaired Income in Impaired Income Balance Balance Allowance Loans Recognized Loans Recognized Loans without an allocated allowance: Residential mortgage loans $ - $ - $ - $ - $ - $ - $ - Commercial real estate and land loans - - - 113 - 144 - Home equity and other consumer 11 11 - 11 - 11 - Residential construction loans - - - - - - - Residential mortgage loans, non-owner occupied 191 191 - 192 3 193 8 Multi-family real estate loans - - - - - - - Commercial loans - - - - - - - Loans with an allocated allowance: Residential mortgage loans 75 75 4 75 1 112 3 Commercial real estate and land loans - - - - - - - Home equity and other consumer - - - - - - - Residential construction loans - - - - - - - Residential mortgage loans, non-owner occupied - - - - - - - Multi-family real estate loans - - - - - - - Commercial loans - - - - - 166 9 Total $ 277 $ 277 $ 4 $ 391 $ 4 $ 626 $ 20 For the Three Months For the Nine Months As of September 30, 2017 September 30, 2017 September 30, 2017 Average Average Unpaid Investment Interest Investment Interest Recorded Principal Allocated in Impaired Income in Impaired Income Balance Balance Allowance Loans Recognized Loans Recognized Loans without an allocated allowance: Residential mortgage loans $ - $ - $ - $ - $ - $ - $ - Commercial real estate and land loans 148 148 - 180 - 214 1 Home equity and other consumer - - - - - - - Residential construction loans - - - - - - - Residential mortgage loans, non-owner occupied 60 60 - 65 1 93 3 Multi-family real estate loans - - - - - - - Commercial loans - - - - - - - Loans with an allocated allowance: Residential mortgage loans 142 142 22 143 1 144 5 Commercial real estate and land loans - - - - - - - Home equity and other consumer - - - - - - - Residential construction loans - - - - - - - Residential mortgage loans, non-owner occupied 198 198 34 199 2 200 7 Multi-family real estate loans - - - - - - - Commercial loans 301 301 139 301 4 315 13 Total $ 849 $ 849 $ 195 $ 888 $ 8 $ 966 $ 29 As of December 31, 2017 Average Unpaid Investment Interest Recorded Principal Allocated in Impaired Income Balance Balance Allowance Loans Recognized Loans without an allocated allowance: Residential mortgage loans $ - $ - $ - $ - $ - Commercial real estate and land loans - - - - - Home equity and other consumer - - - - - Residential construction loans - - - - - Residential mortgage loans, non-owner occupied - - - - - Multi-family real estate loans - - - - - Commercial loans - - - - - Loans with an allocated allowance: Residential mortgage loans 142 142 22 143 7 Commercial real estate and land loans 157 157 10 192 1 Home equity and other consumer - - - - - Residential construction loans - - - - - Residential mortgage loans, non-owner occupied 196 196 32 199 13 Multi-family real estate loans - - - - 3 Commercial loans 300 300 138 313 17 Total $ 795 $ 795 $ 202 $ 847 $ 41 Interest income recognized is not materially different than interest income that would have been recognized on a cash basis. The following table presents the Bank’s nonaccrual loans at September 30, 2018 and December 31, 2017. This table excludes performing troubled debt restructurings. September 30, December 31, 2018 2017 Residential mortgage loans $ 558 $ 634 Commercial real estate and land loans - 157 Home equity and other consumer 39 - Residential construction loans - - Residential mortgage loans, non-owner occupied - - Multi-family real estate loans - - Commercial loans - - Total $ 597 $ 791 Following is a summary of troubled debt restructurings at September 30, 2018 and December 31, 2017: As of September 30, 2018 As of December 31, 2017 Number of Recorded Number of Recorded Residential mortgage loans 1 $ 75 1 $ 77 Commercial real estate and land loans - - - - Home equity and other consumer 1 11 - - Residential construction loans - - - - Residential mortgage loans, non-owner occupied 4 191 4 196 Multi-family real estate loans - - - - Commercial loans - - 1 300 6 $ 277 6 $ 573 As of September 30, 2018, the Bank had total troubled debt restructurings of $277. There were five residential mortgage loans and residential non-owner occupied loans totaling $266 in troubled debt restructurings with the largest totaling $75. The remaining $11 in troubled debt restructurings consisted of one home equity loan. As of December 31, 2017, the Bank had total troubled debt restructurings of $573. There were five residential mortgage loans and residential non-owner occupied loans totaling $273 in troubled debt restructurings with the largest totaling $195. The remaining $300 in troubled debt restructurings consisted of one commercial loan. These loans were modified due to short term concessions. Eagle Savings Bank has no commitments to lend additional funds to the debtors owing receivables whose terms have been modified in troubled debt restructurings. During the three months and nine months ended September, 30, 2018 the Bank added one troubled debt restructuring totaling $11. At September 30, 2018, the Bank had one residential owner-occupied piece of foreclosed real estate totaling $90 and one commercial piece of foreclosed real estate totaling $127. At December 31, 2017, the Bank had no foreclosed real estate. |