Financing Receivables [Text Block] | 4. Loans, Allowance for Loan Losses and Credit Quality Loans are carried at the principal amounts outstanding, or amortized acquired fair value in the case of acquired loans, adjusted by partial charge-offs and net of deferred loan costs or fees. Loan fees and certain direct origination costs are deferred and amortized into interest income over the expected term of the loan using the level-yield method. When a loan is paid off, the unamortized portion is recognized in interest income. Interest income is accrued based upon the daily principal amount outstanding , except for loans on nonaccrual status. Loans purchased by the Company are accounted for under ASC 310 30, Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality 310 30" not 310 30 may Loans are generally placed on nonaccrual status when they are past due 90 310 30 not and interest is reasonably assured and the loan has performed for a reasonable period of time. In cases where a borrower experiences financial difficulties and the Company makes certain concessionary modifications to contractual terms, the loan is classified as a troubled debt restructuring ("TDR"), and therefore by definition is an impaired loan. Concessionary modifications may 310 30, 310 30 not six not The composition of the Company ’s loan portfolio is as follows on the dates indicated. December 31, 201 7 June 30, 201 7 Originate d Purchase d Tota l Originate d Purchase d Tota l (Dollars in thousands ) Residential real estat e $ 80,462 $ 4,723 $ 85,185 $ 83,759 $ 3,377 $ 87,136 Home equit y 12,313 95 12,408 13,931 101 14,032 Commercial real estat e 255,679 238,275 493,954 256,280 241,724 498,004 Commercial and industria l 177,756 1,084 178,840 174,468 1,186 175,654 Consumer 3,803 - 3,803 4,369 - 4,369 Total loan s $ 530,013 $ 244,177 $ 774,190 $ 532,807 $ 246,388 $ 779,195 Total loans include net deferred loan origination costs of $212 $507 December 31, 2017 June 30, 2017, Past Due and Nonaccrual Loans The following i s a summary of past due and nonaccrual loans: December 31 , 2017 Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More-Still Accruing Past Due 90 Days or More- Nonaccrual Total Past Due Total Current Total Loans Nonaccrual Loans (Dollars in thousands) Originated portfolio: Residential real estate $ 1,472 $ 618 $ - $ 2,108 $ 4,198 $ 76,264 $ 80,462 $ 3,783 Home equity - 148 - 108 256 12,057 12,313 107 Commercial real estate 1,870 288 - 123 2,281 253,398 255,679 2,537 Commercial and industrial 1,004 36 - - 1,040 176,716 177,756 2,555 Consumer 55 53 - 36 144 3659 3,803 147 Total originated portfolio 4,401 1,143 - 2,375 7,919 522,094 530,013 9,129 Purchased portfolio: Residential real estate and home equity - - - 220 220 4,598 4,818 220 Commercial and industrial 217 - - - 217 867 1,084 292 Commercial real estate 10,918 5,971 - 4,712 21,601 216,674 238,275 8,450 Total purchased portfolio 11,135 5,971 - 4,932 22,038 222,139 244,177 8,962 Total loans $ 15,536 $ 7,114 $ - $ 7,307 $ 29,957 $ 744,233 $ 774,190 $ 18,091 June 30, 2017 Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More-Still Accruing Past Due 90 Days or More- Nonaccrual Total Past Due Total Current Total Loans Nonaccrual Loans (Dollars in thousands) Originated portfolio: Residential real estate $ 141 $ 574 $ - $ 1,398 $ 2,113 $ 81,646 $ 83,759 $ 3,337 Home equity 49 - - 58 107 13,824 13,931 58 Commercial real estate 2,266 - - 124 2,390 253,890 256,280 413 Commercial and industrial - - - 2,433 2,433 172,035 174,468 2,600 Consumer 69 50 - 32 151 4,218 4,369 103 Total originated portfolio 2,525 624 - 4,045 7,194 525,613 532,807 6,511 Purchased portfolio: Residential real estate and home equity - 1,082 - 16 1,098 2,380 3,478 1,056 Commercial and industrial - - - - - 1,186 1,186 32 Commercial real estate 173 1,997 - 2,922 5,092 236,632 241,724 6,364 Total purchased portfolio 173 3,079 - 2,938 6,190 240,198 246,388 7,452 Total loans $ 2,698 $ 3,703 $ - $ 6,983 $ 13,384 $ 765,811 $ 779,195 $ 13,963 Allowance for Loan Losses and Impaired Loans The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. For residential and consumer loans, a charge-off is recorded no 180 estimated costs to sell. For commercial loans, a charge-off is recorded on a case-by-case basis when all or a portion of the loan is deemed to be uncollectible. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses consists of general, specific, and unallocated reserves and reflects management ’s estimate of probable loan losses inherent in the loan portfolio at the balance sheet date. Management uses a consistent and systematic process and methodology to evaluate the appropriateness of the allowance for loan losses on a quarterly basis. The calculation of the allowance for loan losses is segregated by portfolio segments, which include: residential real estate, commercial real estate, commercial and industrial, consumer, and purchased loans. Risk characteristics relevant to each portfolio segment are as follows: Residential real estate: All loans in this segment are collateralized by residential real estate and repayment is primarily dependent on the credit quality, loan-to-value ratio and income of the individual borrower. The overall health of the economy, particularly unemployment rates and housing prices, has a significant effect on the credit quality in this segment. For purposes of the Company ’s allowance for loan loss calculation, home equity loans and lines of credit are included in residential real estate. Commercial real estate: Loans in this segment are primarily income-producing properties. For owner-occupied properties, the cash flows are derived from an operating business, and the underlying cash flows may may and operating statements, with which it monitors the cash flows of these loans. Adverse developments in either of these areas will have an adverse effect on the credit quality of this segment. For purposes of the allowance for loan losses, this segment also includes construction loans. Commercial and industrial: Loans in this segment are made to businesses and are generally secured by the assets of the business. Repayment is expected from the cash flows of the business. This segment also includes loans to non-bank lenders, which are generally secured by a collateral assignment of the notes and mortgages on loans originated by the non-bank lenders. Weakness in national or regional economic conditions, and a corresponding weakness in consumer or business spending, will have an adverse effect on the credit quality of this segment. Consumer: Loans in this segment are generally secured, and repayment is dependent on the credit quality of the individual borrower. Repayment of consumer loans is generally based on the earnings of individual borrowers, which may Purchased: Loans in this segment are typically secured by commercial real estate, multi-family residential real estate, or business assets and have been acquired by the Bank’s Loan Acquisition and Servicing Group (“LASG”). Loans acquired by the LASG are, with limited exceptions, performing loans at the date of purchase. Repayment of loans in this segment is largely dependent on cash flow from the successful operation of the property, in the case of non-owner occupied property, or operating business, in the case of owner-occupied property. Loan performance may 310 30. The general component of the allowance for loan losses for originated loans is based on historical loss experience adjusted for qualitative factors stratified by loan segment. The Company does not ● Levels and trends in delinquencies; ● Trends in the volume and nature of loans; ● Trends in credit terms and policies, including underwriting standards, procedures and practices, and the experience and ability of lending management and staff; ● Trends in portfolio concentration; ● National and local economic trends and conditions; ● Effects of changes or trends in internal risk ratings; and ● Other effects resulting from trends in the valuation of underlying collateral. The allocated component of the allowance for loan losses relates to loans that are classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan ’s effective interest rate or the fair value of the collateral if the loan is collateral dependent. An allowance is established when the discounted cash flows or collateral value of the impaired loan is lower than the carrying value of the loan. For all portfolio segments, except loans accounted for under ASC 310 30, not ’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. For the purchased loan segment, a loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to realize cash flows as expected at acquisition. For loans accounted for under ASC 310 30 The following table sets forth activity in the Company ’s allowance for loan losses. Three Months Ended December 31 , 2017 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased Unallocated Total (Dollars in thousands) Beginning balance $ 513 $ 2,443 $ 727 $ 41 $ 310 $ - $ 4,034 Provision 176 74 (42 ) 19 210 - 437 Recoveries 1 - 5 25 - - 31 Charge-offs (112 ) - - (35 ) - - (147 ) Ending balance $ 578 $ 2,517 $ 690 $ 50 $ 520 $ - $ 4,355 Three Months Ended December 31, 2016 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased Unallocated Total (Dollars in thousands) Beginning balance $ 541 $ 1,421 $ 318 $ 68 $ 158 $ - $ 2,506 Provision 6 351 207 40 24 - 628 Recoveries 27 19 6 21 - - 73 Charge-offs - (41 ) - (59 ) - - (100 ) Ending balance $ 574 $ 1,750 $ 531 $ 70 $ 182 $ - $ 3,107 Six Months Ended December 31, 2017 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased Unallocated Total (Dollars in thousands) Beginning balance $ 477 $ 2,312 $ 520 $ 53 $ 303 $ - $ 3,665 Provision 217 205 147 6 217 - 792 Recoveries 8 - 23 31 - - 62 Charge-offs (124 ) - - (40 ) - - (164 ) Ending balance $ 578 $ 2,517 $ 690 $ 50 $ 520 $ - $ 4,355 Six Months Ended December 31, 201 6 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased Unallocated Total (Dollars in thousands) Beginning balance $ 663 $ 1,195 $ 297 $ 62 $ 133 $ - $ 2,350 Provision (93 ) 577 224 63 49 - 820 Recoveries 29 19 11 32 - - 91 Charge-offs (25 ) (41 ) (1 ) (87 ) - - (154 ) Ending balance $ 574 $ 1,750 $ 531 $ 70 $ 182 $ - $ 3,107 The following table sets forth information regarding the allowance for loan losses by portfolio segment and impairment methodology. Dec ember 31, 2017 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased Unallocated Total (Dollars in thousands) Allowance for loan losses: Individually evaluated $ 307 $ 163 $ 144 $ 9 $ - $ - $ 623 Collectively evaluated 271 2,354 546 41 - - 3,212 ASC 310-30 - - - - 520 - 520 Total $ 578 $ 2,517 $ 690 $ 50 $ 520 $ - $ 4,355 Loans: Individually evaluated $ 6,053 $ 3,867 $ 2,592 $ 315 $ - $ - $ 12,827 Collectively evaluated 86,722 251,812 175,164 3,488 - - 517,186 ASC 310-30 - - - - 244,177 - 244,177 Total $ 92,775 $ 255,679 $ 177,756 $ 3,803 $ 244,177 $ - $ 774,190 June 30, 201 7 Residential Commercial Commercial Real Estate Real Estate and Industrial Consumer Purchased Unallocated Total (Dollars in thousands) Allowance for loan losses: Individually evaluated $ 252 $ 147 $ 149 $ 4 $ - $ - $ 552 Collectively evaluated 225 2,165 371 49 - - 2,810 ASC 310-30 - - - - 303 - 303 Total $ 477 $ 2,312 $ 520 $ 53 $ 303 $ - $ 3,665 Loans: Individually evaluated $ 5,676 $ 1,759 $ 2,694 $ 296 $ - $ - $ 10,425 Collectively evaluated 92,014 254,521 171,774 4,073 - - 522,382 ASC 310-30 - - - - 246,388 - 246,388 Total $ 97,690 $ 256,280 $ 174,468 $ 4,369 $ 246,388 $ - $ 779,195 The following table sets forth information regarding impaired loans. Loans accounted for under ASC 310 30 performed based on cash flow and accretable yield expectations determined at date of acquisition are not December 31 , 2017 June 30, 201 7 Unpaid Unpaid Recorded Principal Related Recorded Principal Related Investment Balance Allowance Investment Balance Allowance (Dollars in thousands) Impaired loans without a valuation allowance: Originated: Residential real estate $ 3,848 $ 3,840 $ - $ 4,052 $ 4,084 $ - Consumer 276 303 - 250 271 - Commercial real estate 2,482 2,477 - 359 354 - Commercial and industrial 1,758 1,758 - 1,870 1,870 - Purchased: Residential real estate 54 54 - 1,056 1,099 - Commercial real estate 10,589 13,408 - 8,696 11,468 - Commercial and industrial 24 57 - 32 65 - Total 19,031 21,897 - 16,315 19,211 - Impaired loans with a valuation allowance: Originated: Residential real estate 2,205 2,186 307 1,624 1,595 252 Consumer 39 41 9 46 55 4 Commercial real estate 1,385 1,374 163 1,400 1,388 147 Commercial and industrial 834 834 144 824 824 149 Purchased: Residential real estate 166 180 4 - - - Commercial real estate 4,676 5,102 190 3,528 3,929 176 Commercial and industrial 362 421 321 94 108 55 Total 9,667 10,138 1,138 7,516 7,899 783 Total impaired loans $ 28,698 $ 32,035 $ 1,138 $ 23,831 $ 27,110 $ 783 The following tables set forth information regarding interest income recognized on impaired loans. Three Months Ended December 31, 201 7 2016 Average Interest Average Interest Recorded Income Recorded Income Investment Recognized Investment Recognized (Dollars in thousands) Impaired loans without a valuation allowance: Originated: Residential real estate $ 3,992 $ 38 $ 3,730 $ 62 Consumer 285 7 200 8 Commercial real estate 2,454 1 466 15 Commercial and industrial 1,794 2 1,080 33 Purchased: Residential real estate 566 - 1,087 - Commercial real estate 9,814 102 4,705 47 Commercial and industrial 26 - 32 - Total 18,931 150 11,300 165 Impaired loans with a valuation allowance: Originated: Residential real estate 1,904 42 1,952 73 Consumer 32 1 93 2 Commercial real estate 1,388 27 1,115 31 Commercial and industrial 850 2 504 12 Purchased: Residential real estate 83 1 - - Commercial real estate 4,108 38 1,423 7 Commercial and industrial 228 3 28 2 Total 8,593 114 5,115 127 Total impaired loans $ 27,524 $ 264 $ 16,415 $ 292 Six Months Ended December 31, 201 7 201 6 Average Interest Average Interest Recorded Income Recorded Income Investment Recognized Investment Recognized (Dollars in thousands) Impaired loans without a valuation allowance: Originated: Residential real estate $ 4,012 $ 74 $ 3,550 $ 111 Consumer 273 13 219 11 Commercial real estate 1,756 94 461 23 Commercial and industrial 1,819 39 725 36 Purchased: Residential real estate 729 - 1,100 3 Commercial real estate 9,441 182 4,661 99 Commercial and industrial 28 - 21 - Total 18,058 402 10,737 283 Impaired loans with a valuation allowance: Originated: Residential real estate 1,811 63 1,917 89 Consumer 36 2 97 4 Commercial real estate 1,392 49 1,155 49 Commercial and industrial 841 6 336 12 Purchased: Residential real estate 55 1 - - Commercial real estate 3,915 65 1,443 24 Commercial and industrial 183 3 19 2 Total 8,233 189 4,967 180 Total impaired loans $ 26,291 $ 591 $ 15,704 $ 463 Credit Quality The Company utilizes a ten Loans rated 1 – 6: 1 5 6 Loans rated 7: Loans rated 8: Loans rated 9: one 8 Loans rated 10: not On an annual basis, or more often if needed, the Company formally reviews the ratings of all loans subject to ris k ratings. Annually, the Company engages an independent third may The following tables present the Company ’s loans by risk rating. December 31 , 2017 Originated Portfolio Commercial Commercial Purchased Real Estate and Industrial Residential (1) Portfolio Total (Dollars in thousands) Loans rated 1- 6 $ 248,576 $ 174,482 $ 13,754 $ 231,544 $ 668,356 Loans rated 7 4,537 2,186 66 3,021 9,810 Loans rated 8 2,566 1,088 1,298 9,612 14,564 Loans rated 9 - - 19 - 19 Loans rated 10 - - - - - $ 255,679 $ 177,756 $ 15,137 $ 244,177 $ 692,749 June 30, 201 7 Originated Portfolio Commercial Commercial Purchased Real Estate and Industrial Residential (1) Portfolio Total (Dollars in thousands) Loans rated 1- 6 $ 253,041 $ 171,160 $ 10,039 $ 229,980 $ 664,220 Loans rated 7 2,686 2,483 71 9,622 14,862 Loans rated 8 554 825 803 6,786 8,968 Loans rated 9 - - 19 - 19 Loans rated 10 - - - - - $ 256,281 $ 174,468 $ 10,932 $ 246,388 $ 688,069 ( 1 Certain of the Company’s loans made for commercial purposes, but secured by residential collateral, are rated under the Company’s risk-rating system. T roubled Debt Restructurings The following table shows the Company ’s post-modification balance of TDRs by type of modification. Three Months Ended December 31, Six Months Ended December 31, 201 7 201 6 201 7 201 6 Number of Recorded Number of Recorded Number of Recorded Number of Recorded Contracts Investment Contracts Investment Contracts Investment Contracts Investment (Dollars in thousands) Extended maturity - $ - 1 $ 154 1 $ 18 1 $ 154 Adjusted interest rate 1 15 2 135 1 15 3 144 Rate and maturity 3 2,263 - - 3 2,263 1 334 Principal deferment 2 283 1 161 3 938 1 161 Court ordered concession - - - - - - - - 6 $ 2,561 4 $ 450 8 $ 3,234 6 $ 793 The following table shows loans modified in a TDR and the change in the recorded investment subsequent to the modifications occurring. Three Months Ended December 31, 201 7 201 6 Recorded Recorded Recorded Recorded Number of Investment Investment Number of Investment Investment Contracts Pre-Modification Post-Modification Contracts Pre-Modification Post-Modification (Dollars in thousands) Originated portfolio: Residential real estate 2 $ 29 $ 30 3 $ 266 $ 289 Home equity - - - - - - Commercial real estate 2 2,079 2,140 - - - Commercial and industrial - - - 1 91 161 Consumer - - - - - - Total originated portfolio 4 2,108 2,170 4 357 450 Purchased portfolio: Residential real estate - - - - - - Commercial real estate 1 123 123 - - - Commercial and industrial 1 268 268 - - - Total purchased portfolio 2 391 391 - - - Total 6 $ 2,499 $ 2,561 4 $ 357 $ 450 Six Months Ended December 31 , 201 7 2016 Recorded Recorded Recorded Recorded Number of Investment Investment Number of Investment Investment Contracts Pre-Modification Post-Modification Contracts Pre-Modification Post-Modification (Dollars in thousands) Originated portfolio: Residential real estate 3 $ 47 $ 48 4 $ 275 $ 298 Home equity - - - - - - Commercial real estate 2 2,079 2,140 - - - Commercial and industrial 1 655 655 1 91 161 Consumer - - - - - - Total originated portfolio 6 2,781 2,843 5 366 459 Purchased portfolio: Residential real estate - - - - - - Commercial real estate 1 123 123 - - - Commercial and industrial 1 268 268 1 334 334 Total purchased portfolio 2 391 391 1 334 334 Total 8 $ 3,172 $ 3,234 6 $ 700 $ 793 The Company considers TDRs past due 90 yment default. No twelve three six December 31, 2017. December 31, 2016 2017, no ASC 310 30 The following tables present a summary of loans accounted for under ASC 310 30 Three Months Ended December 31, 201 7 Three Months Ended December 31, 2016 (Dollars in thousands) Contractually required payments receivable $ 49,408 $ 68,466 Nonaccretable difference (1,667 ) (977 ) Cash flows expected to be collected 47,741 67,489 Accretable yield (12,939 ) (21,456 ) Fair value of loans acquired $ 34,802 $ 46,033 Six Months Ended December 31, 201 7 Six Months Ended December 31, 2016 (Dollars in thousands) Contractually required payments receivable $ 55,320 $ 94,720 Nonaccretable difference (1,824 ) (3,494 ) Cash flows expected to be collected 53,496 91,226 Accretable yield (15,043 ) (31,340 ) Fair value of loans acquired $ 38,453 $ 59,886 Certain loans accounted for under ASC 310 30 not As of and for the Three Months Ended Dec ember 31, 2017 As of and for the Six Months Ended December 31 , 2017 (Dollars in thousands) Loans acquired during the period $ 5 $ 5 Loans at end of period 6,901 6,901 The following table s summarize the activity in the accretable yield for loans accounted for under ASC 310 30. Three Months Ended December 31, 201 7 Three Months Ended December 31, 201 6 (Dollars in thousands) Beginning balance $ 122,923 $ 124,023 Acquisitions 12,939 21,456 Accretion (4,244 ) (4,656 ) Reclassifications from non-accretable difference to accretable yield 1,095 973 Disposals and other changes (7,810 ) (13,373 ) Ending balance $ 124,903 $ 128,423 Six Months Ended December 31, 201 7 Six Months Ended December 31, 201 6 (Dollars in thousands) Beginning balance $ 131,197 $ 124,151 Acquisitions 15,043 31,340 Accretion (8,669 ) (9,308 ) Reclassifications from non-accretable difference to accretable yield 4,523 1,131 Disposals and other changes (17,191 ) (18,891 ) Ending balance $ 124,903 $ 128,423 The following table provides information related to the unpaid principal balance and carrying amounts of ASC 310 30 Dec ember 31, 2017 June 30, 201 7 (Dollars in thousands) Unpaid principal balance $ 266,374 $ 271,709 Carrying amount 236,047 239,583 |